On Thursday, U.S. stocks faced a downward trend, culminating in a significant decline in the Nasdaq, which fell by over 1%. This movement was primarily driven by disappointing forecasts from Salesforce, a major player in the technology sector. The downward trajectory in technology shares overshadowed any gains seen in other sectors.
Salesforce’s shares experienced a sharp decline of 19.7% following the company’s announcement of second-quarter profit and revenue forecasts that fell below Street estimates. The forecast attributed the weaker-than-expected performance to subdued client spending on its cloud and enterprise business products. Consequently, the S&P 500 technology sector bore the brunt of this news, dropping by 2.5% and emerging as the primary drag on the benchmark index. Additionally, the communication services sector also faced a downturn, falling by 1.1%, while other sectors of the S&P 500 managed to end the day with gains.
Adding to the negative sentiment, data released by the Commerce Department revealed that the economy’s growth in the first quarter was slower than previously estimated. This revision stemmed from downward adjustments to consumer and equipment spending, coupled with a decrease in a key measure of inflation. The market reaction to this news was somewhat unexpected. Typically, a downward revision to GDP would signal a moderation in economic growth, potentially prompting rate cuts by the Federal Reserve. However, contrary to expectations, the market responded cautiously to this data.
Mark Hackett, Chief of Investment Research at Nationwide, expressed surprise at the market’s reaction, noting that a downward revision to GDP would traditionally lead to a rally as it suggests the economy is moderating and may prompt rate cuts. However, he attributed the subdued response to the recent market rally, suggesting that some consolidation or sideways movement was to be expected after such a prolonged period of upward momentum.
In terms of market performance, the S&P 500 closed lower by 31.47 points, or 0.60%, at 5,235.48, while the Nasdaq Composite dropped by 183.50 points, or 1.08%, to 16,737.08. The Dow Jones Industrial Average also experienced a decline of 330.06 points, or 0.86%, closing at 38,111.48.
Following the release of economic data, U.S. Treasury yields dipped, and the likelihood of a 25-basis-point interest rate reduction in September increased to 50.4%, according to the CME Group’s FedWatch Tool. This shift in expectations came after bond yields had reached multi-week highs earlier in the week.
After the market close, Dell Technologies reported quarterly results, leading to a decline of more than 12% in its shares. However, during the regular session, HP’s shares surged by 17% after reporting better-than-expected second-quarter revenue. Additionally, Tesla’s stock rose by 1.5% following reports that the company was preparing to register its ‘Full Self-Driving’ software in China.
Retailer Best Buy witnessed a significant increase of 13.4% in its shares after beating forecasts for quarterly profit. Conversely, department-store chain Kohl’s saw its shares slump by 22.9% after cutting its annual sales and profit forecasts.
In terms of market breadth, advancing issues outnumbered decliners on both the NYSE and Nasdaq exchanges. The S&P 500 posted 14 new 52-week highs and 10 new lows, while the Nasdaq Composite recorded 51 new highs and 95 new lows. Trading volume on U.S. exchanges totaled 12.10 billion shares, slightly below the 12.39 billion average for the last 20 trading days.
The day’s market movements underscored the complex interplay of economic data, corporate earnings, and investor sentiment, highlighting the ongoing volatility and uncertainty in the financial markets.