U.S. stocks closed sharply lower for a second straight day after technology giants reported disappointing earnings and guidance, dragging other tech giants down in the wake of the results. Market participants also digested mixed economic data. All three major stock indexes ended in negative territory.
How did the benchmarks perform?
The Dow Jones Industrial Average (DJI) fell 0.9%, or 330.06 points, to close at 38,111.48. Twenty-one of the 30 stocks ended in negative territory, while nine ended in positive territory. The tech-heavy Nasdaq Composite Index plunged 1.1%, to close at 16,737.08, on poor performance from the US tech giants.
The S&P 500 fell 0.6% to close at 5,235.48. However, eight of the broad market index’s 11 broad sectors finished in positive territory and three in negative territory. The Real Estate Select Sector SPDR (XLRE) and Utilities Select Sector SPDR (XLU) each rose 1.4%, while the Technology Select Sector SPDR (XLK) fell 2.3%.
The fear gauge CBOE Volatility Index, or VIX, rose 1.3% to 14.47. Volume totaled 12.1 billion shares on Thursday, below the 12.39 billion average over the past 20 sessions. Advancing issues outnumbered declining ones on the NYSE by a 2.57-to-1 ratio. Advancing issues outnumbered declining ones on the Nasdaq by a 1.41-to-1 ratio.
Salesforce plummets
On May 29, after the close of trading, Salesforce.com CRM announced its financial results for the first quarter of fiscal year 2025. Quarterly adjusted earnings per share (EPS) was $2.44, beating the Zacks Consensus Estimate of $2.38. However, quarterly sales of $9.13 billion were slightly below the Zacks Consensus Estimate of $9.14 million. This is the first time since 2006 that the company has done so.
Additionally, the leading global provider of on-demand customer relationship management (CRM) software expects second-quarter fiscal 2025 revenue to be in the range of $9.2 billion to $9.25 billion. The midpoint of $9.225 billion is below the Zacks Consensus Estimate of $9.32 billion. Adjusted EPS is expected to be in the range of $2.34 to $2.36. The midpoint of $2.35 is well below the Zacks Consensus Estimate of $2.40.
As a result, Salesforce shares fell 19.7%, posting their worst daily performance since July 4, 2004. Salesforce currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Commerce Department revised down its forecast for U.S. GDP growth in the first quarter of 2024 to 1.3% from the previously announced 1.6%. This data is significantly lower than the 3.4% GDP growth forecast for the fourth quarter of 2023. This would be the lowest quarterly GDP growth rate since the second quarter of 2022.
Corporate profits fell for the first time in a year, dropping 0.6% to $3.39 trillion from a record high set in the previous quarter. Consumer spending growth was revised down to an annualized 2% rate from a previously reported 2.5%, due mainly to a shortfall in household spending on durable goods.
Personal consumption expenditures (PCE) inflation was revised down to 3.3% from the previously reported 3.4%. Gross domestic income increased 1.5%, down sharply from 3.6% in the fourth quarter and the lowest since the second quarter of 2023.
The Labor Department said initial jobless claims rose by 3,000 to 219,000 for the week ended May 25, beating the consensus estimate of 218,000. The previous week’s data was revised upward by 1,000 to 216,000. Continuing claims (people who had already received government assistance and reported with a one-week lag) rose by 4,000 to 1.791 million for the week ended May 18. The previous week’s level was revised downward by 7,000 to 1.787 million from 1.794 million.
The National Association of Realtors reported that pending home purchase contracts fell 7.7% in April, compared with the consensus forecast of a 0.4% increase. The March reading was revised upward to a 3.6% increase from the previously reported 3.4%.
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