The New York Stock Exchange ended with a loss on Thursday as the market wonders whether the Fed will cut rates this year while some disappointing results have cooled investors.
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For the second session in a row, the indices ended in the red: the Dow Jones lost 0.86% to 38,111.48 points, the Nasdaq, predominantly technological, dropped 1.08% to 16,737.08 points and the S&P 500 fell 0.60% to 5,235.48 points.
Investors were also cooled by the disappointing results of Salesforce, a heavyweight on the Dow Jones. The client software and cloud giant lost 19.74% to $218.01 after announcing first-quarter revenue of $9.13 billion versus an expected $9.15 billion. The outlook given for the second quarter also disappointed.
Also members of the Dow Jones, Microsoft (-3.38%) and Amazon (-1.48%), also very active in cloud computing, saw their shares fall.
Hitting the Nasdaq, the semiconductor sector plunged in the second part of the session. Press reports have cited restrictions by the US government on shipments of AI chips to the Middle East, including the United Arab Emirates and Saudi Arabia, over fears that they could be accessible to Chinese companies.
Nvidia, the specialist in chips for AI and data centers, reacted downward, losing 3.77% to $1,105.
Taiwan Semiconductor Manufacturing fell 0.89%.
On the bond market, yields, which had risen sharply over the last two days, fell back to 4.54% around 8:35 p.m. GMT compared to 4.61% the day before for ten-year rates.
For Steve Sosnick of Interactive Brokers, the bond market “was a little relieved that there were no new issues” of US Treasury bonds on Thursday. The three recent auctions met with little success, the market being flooded with loans.
On the indicators front, the growth of GDP (gross domestic product) of the United States in the first quarter was revised downwards, to +1.3% at an annual rate against +1.6% previously estimated and 3.4% at 4th quarter of 2023.
This slowdown in growth can be seen as a good thing by the Fed which seeks to slow down activity to compress inflation. This is one of the factors that has relaxed the bond market a little, said Steve Sosnick.
But on the stock market side, operators are wondering about the timetable for rate cuts, if any.
“We don’t see any sign from the Fed” indicating that it will lower rates, underlines Jack Ablin of Cresset.
For the first time, only a minority on the market (44%) think that the central bank will cut rates in September, according to calculations on CME futures products.
“Opinion is increasingly divided that the Fed will not cut rates this year. If she doesn’t do it in September, she won’t do it before the presidential elections. The Central Bank does not want to appear politicized,” explained the analyst.
Elsewhere on the stock market, shares of department store chain Kohl’s fell 22.86% to $21.02 after poor first-quarter results which saw sales fall 4.4% year-on-year, the ninth quarterly decline in a row.
The sports shoe brand Foot Locker soared by 14.96%, on the other hand, the group having impressed Wall Street with sales better than expected at $1.88 billion in the first quarter even if they were down slightly compared to last year.
Foot Locker confirmed its full-year guidance for revenue growth of 1% to 3%.
Media and entertainment company Paramount Global (+1.03%) has received an improved buyout offer from production company Skydance, says the Wall Street Journal.
