Dow Jones falls sharply on interest rate outlook and Salesforce collapse

DOW JONES index futures fell 0.80% to 38,135 and S&P 500 futures fell 0.21% to 5,256. NASDAQ 100 futures fell 0.11% to 18,716.

Yesterday, Wednesday, the major Wall Street indices completed a very difficult session. The Dow Jones Industrial Average fell more than 400 points, falling 1.1%, and is moving further and further away from the 40,000 mark reached just a few days ago. The S&P 500 fell 0.7%, but perhaps more striking was the fact that more than 400 of the 500 index components fellwith 11 red sectors.

The Nasdaq Composite index fell 0.6% and recorded its worst session in all of May, although NVIDIA managed to close higher again (+0.08%).

Monitor the average price of DOW JONES Ind in real time

Much of the blame for this punishment stems from investors’ overestimation of this year’s rate forecast. Futures give there is more than a 50% chance that the Fed will not change rates at the next three meetings of its Federal Open Market Committee (FOMC), including the September meetingAccording to FedWatch CME tool. Just a week ago the probability was 42%.

These prospects are reflected in debt yields, putting even more pressure on stocks. Yesterday The yield on benchmark 10-year bonds rose above the 4.6% threshold for the first time in a month., and although there is some respite today, it is still 4.5938%. The yield on two-year bonds is 4.9622%.

Higher yields can be bad news for stock investors because they reduce the multiples investors are willing to pay for stocks and make safer investments like Treasury bills and money market funds more attractive.

“We have a ‘longer-term top’ context, which is not new news, but in the (current) lack of catalysts, it puts pressure on average stocks, especially at extended valuations, which is where we are now,” he explains. Mayfield is an investment strategy analyst at Baird.

On the macroeconomic agenda, this Thursday investors learned the second GDP estimate for the first quarter, which shows that The world’s largest economy grew 1.3%, below the first estimate of 1.6%.. Personal consumption spending rose 2.0% in the first quarter, versus the consensus of 2.2% and the previous estimate of 2.5%.

Also known are the usual weekly numbers for initial unemployment claims: 219,000 claims, slightly higher than the 218,000 expected.

Even with the GDP data, the main macro event this week is Friday’s release of the April Personal Consumption Price Index (PCE) report, the Federal Reserve’s preferred inflation gauge.

Salesforce crashes the Dow Jones index

In the business sphere, one of the negative news of the day is Salesforce, which fell 16% after reporting last night, which is disappointing from a revenue perspective. Specifically, first-quarter revenue was $9.13 billion, compared to the consensus estimate of $9.17 billion. Adjusted earnings of $2.44 per share beat the consensus estimate of $2.38, but estimates for the current quarter fell short below expectations on both the top and bottom line of the balance sheet, which is the finishing touch to the value.

Salesforce is one of 30 components of the DOW JONES index, so its sharp drop of more than $43 a share represents a loss of about 280 points for an index that weights each component based on its price. Currently, Any $1 move in DOW JONES stock causes the index to rise or fall about 6.6 points.

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Another component of the Dow Jones Industrial Average that investors should be keeping an eye on today is Walt Disney after it was reported last night that activist investor and Trian Fund Management founder Nelson Peltz has sold his entire stake in the entertainment giant after losing a battle. in company.

Back to Earnings Season, Best Buy The company missed revenue expectations but beat earnings per share and maintained its full-year guidance.. The company reported adjusted earnings per share of $1.20, compared with expectations of $1.08. Revenue reached $8.85 billion versus expected $8.96 billion.

The retailer expects full-year revenue to be between $41.3 billion and $42.6 billion, which would mark a decline from its last completed fiscal year, when annual revenue was $43.45 billion.

HP increases by 3% before opening. The computer maker reported adjusted earnings of 82 cents per share and revenue of $12.8 billion in its fiscal second quarter, beating analysts’ estimates of 81 cents per share for earnings and $12.6 billion in revenue.

Kohl’s shares fell 20% after weak results and forecasts. Retailer registered unexpected loss of 24 cents per share in the first quarter, while analysts expected earnings of 4 cents per share. Revenue was $3.18 billion, missing the Wall Street consensus of $3.34 billion. Kohl’s also warned that full-year sales were expected to fall more than expected.

Foot Locker shares soared more than 12% after beating expectations. The company reported adjusted earnings of 22 cents per share, compared with analysts’ expectations of earnings of 12 cents per share.

Dell Technologies, Costco, Gap and Nordstrom will release their quarterly earnings reports after the close of business.

In commodity markets, oil prices are falling on the back of US reserves data and ahead of the OPEC+ meeting next Sunday. US West Texas crude futures fell 0.42% to $78.90 a barrel, while European benchmark Brent fell 0.46% to $83.05 a barrel.

The euro rose 0.14% against the dollar today, leaving the exchange rate at $1.0819 for each currency.

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