US stock indexes fell on Thursday, with a plunge in Salesforce dragging on the Dow, while data showing the economy grew slower than previously expected in the first quarter supported bets of interest-rate cuts from the Federal Reserve this year.
Salesforce was the biggest weight on the Dow, nosediving 20 per cent after it forecast second-quarter profit and revenue below Street estimates due to weak client spending on its cloud and enterprise business products.
US gross domestic product growth for the first quarter was lowered to 1.3 per cent, versus a previously estimated 1.6 per cent expansion, primarily due to downward revisions to consumer spending, the Commerce Department reported
Ahead of Friday’s personal consumption expenditure report for April – the Fed’s preferred inflation gauge – first-quarter growth in the core Personal Consumption Expenditures Price Index was revised down to 3.6 per cent from 3.7 per cent. Weekly jobless claims also rose more than expected.
US Treasury yields dipped following the report, while chances for an at least 25-basis-point interest rate reduction in September edged up to nearly 52 per cent, from 48.7 per cent before the data, according to the CME Group’s FedWatch Tool.
“Less economic growth isn’t necessarily all that negative because we’re still in a growth pattern, and the good news is that inflation measured by the PCE was revised down… that will help alleviate pressures in the bond market and could cause stocks to stabilise,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Uncertainty over monetary policy, combined with heavy new Treasury issuance, has pushed bond yields higher and pressured stocks.
Traders now await remarks from New York Fed President John Williams and Dallas Fed President Lorie Logan later in the day.
The benchmark S&P 500 Index fell to its lowest in two weeks, while the blue-chip Dow dropped to a one-month low.
However, small-cap stocks regained some ground, with the Russell 2000 Index rising 0.7 per cent after the previous session’s 1.5 per cent drop.
At 9.56 am, the Dow Jones Industrial Average was down 356.36 points, or 0.93 per cent, at 38,085.18, the S&P 500 was down 13.80 points, or 0.26 per cent, at 5,253.15, and the Nasdaq Composite was down 40.29 points, or 0.24 per cent, at 16,880.29.
Tesla gained 2.7 per cent after Reuters reported the company was preparing to register its ‘Full Self-Driving’ software in China.
Retailer American Eagle Outfitters dropped 6.5 per cent, posting downbeat quarterly revenue as sticky inflation hurt demand for its apparel and accessories, often sold full-price.
Department-store chain Kohl’s slumped 25.2 per cent after cutting its annual sales and profit forecasts.
Best Buy and HP were the top S&P 500 gainers. Best Buy jumped 11.7 per cent after beating forecasts for quarterly profit and predicting higher laptop sales, while HP gained 12.4 per cent after it posted better-than-expected second-quarter revenue.
Advancing issues outnumbered decliners by a 2.83-to-1 ratio on the NYSE and by a 1.82-to-1 ratio on the Nasdaq.
The S&P index recorded seven new 52-week highs and eight new lows, while the Nasdaq recorded 27 new highs and 36 new lows.
Source Agencies
