US stock markets encountered a challenging week with the Dow witnessing a decline of approximately 1,000 points in the past three days alone, and this negative trend persisted on Thursday.
The Dow concluded 331 points lower, marking a decrease of 0.9%. Similarly, the S&P 500 experienced a decline of 0.6%, while the Nasdaq Composite dropped by 1.1%. The disappointing earnings report from Salesforce (CRM) contributed to investor concerns.
Salesforce, a prominent player in customer relationship management, suffered a substantial drop of 19.7% following its announcement of a revenue shortfall and a downward adjustment of expectations for the forthcoming year, marking its worst performance in two decades.
The market woes extended from Wednesday when all 11 sectors of the S&P 500 closed in the red. The Dow experienced a significant dip of over 300 points, primarily driven by a decline in shares of Nvidia (NVDA), a leading chipmaking company, which subsequently dragged down other major tech stocks.
The recent downturn can be attributed to various factors, including disappointing earnings reports and unexpectedly strong economic data. Bonds witnessed a notable decrease in value amidst mounting concerns about inflation, exacerbated by a lackluster Treasury auction on Wednesday. The 10-year Treasury yield surged to its highest level since late April.
Investor anxiety was further fueled by robust economic indicators, raising fears that a stronger economy might prompt the Federal Reserve to maintain higher interest rates for a prolonged period to counter inflationary pressures.
Despite the S&P 500 registering gains in 23 out of the last 30 weeks, matching a record set in 1989, it appears to be heading towards a negative performance for the current week.
Deutsche Bank analysts observed, “There had already been a relentless run of gains in recent weeks that was always going to be tough to maintain. It’s clear that the momentum is now more negative.”
New economic figures released on Thursday indicated a downward revision of US gross domestic product for the first quarter, from 1.6% to 1.3%, coupled with a slowdown in personal consumption. This suggests a moderation in economic expansion, a development viewed with mixed sentiments by analysts.
Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, remarked, “The data could be a concern for companies and stock market investors, but on the other hand, slowing consumption and economic growth could be just the news we need to see in order for the rate of inflation to keep coming down and allow the Fed to reduce interest rates after all.”
All eyes are now on the impending release of the Personal Consumption Expenditures index for April on Friday, which serves as the Federal Reserve’s preferred measure of inflation.
