US stocks are plummeting on Thursday, as lingering concerns about higher-for-longer interest rates and a dismal earnings report from Salesforce (CRM) send investors running for cover.
Market Data:
- – Dow Jones Industrial Average futures (YM=F):-0.9%
- – S&P 500 futures (ES=F): -0.4%
- – Nasdaq 100 contracts (NQ=F): -0.3%
- – 10-year Treasury yield (^TNX): above 4.5%
The stock market’s downward spiral is fueled by renewed fears about the likelihood of rate cuts, following data that showed inflation cooling less than expected. The Federal Reserve’s resolve to keep interest rates high has lifted US bond yields to their highest levels since early May, with the 10-year Treasury (^TNX) yield hovering above 4.5% despite a slight retreat on Thursday.
“This is a classic case of risk-off sentiment,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “Investors are fleeing stocks and seeking safe-haven assets as rate fears and earnings disappointments take center stage.”
In other market news, Nvidia’s (NVDA) blockbuster earnings report failed to spark a broader stock rally, as investors remain cautious about the tech sector’s prospects. The semiconductor maker’s shares rose 2% in pre-market trading, but this was not enough to offset the market’s overall gloom.
Salesforce’s dismal earnings report has earlier sparked concerns about the potential losers in the AI boom, with the software maker’s shares tumbling 15% in pre-market trading after it warned of stalled sales growth. This has added to the market’s woes, as investors grapple with the implications of a prolonged rate hike cycle on the tech sector.
“The Salesforce report is a clear indication that the AI boom is not immune to the economic slowdown,” said Daniel Ives, managing director at Wedbush Securities. “This is a major red flag for the tech sector, and investors are taking notice.”
Thursday’s economic data releases will be closely watched for signs of the US economy’s resilience, which has been a key factor in the Fed’s decision-making process. A second reading on first-quarter GDP and weekly jobless claims are due out, providing further insight into the state of the economy.
In the retail sector, Kohl’s (KSS) shares plummeted after the department store chain reported a surprise quarterly loss and cut its annual sales forecast. Best Buy (BBY) also posted a larger-than-expected drop in comparable sales, as American consumers become increasingly selective about their discretionary spending.
“The consumer is clearly feeling the pinch, and that’s a major concern for the economy,” said Chris Rupkey, chief economist at FWDBONDS. “The Fed may be forced to reconsider its rate hike plans if the data continues to deteriorate.”
As the stock market continues its downward slide, investors are seeking safe-haven assets and reining in their risk appetite. Gold prices have risen 1% to $1,940 per ounce, while the US dollar index has strengthened 0.2% against a basket of currencies.
In Essence
The stock market’s woes are far from over, as rate fears and disappointing earnings reports continue to weigh on investor sentiment. With the Fed’s next policy decision looming, investors are bracing for further volatility and uncertainty in the markets.
