The Dow fell on Thursday after dismal earnings from Salesforce tempered optimism sparked by passage of a bill by lawmakers to suspend the nation’s debt ceiling and bets that the Federal Reserve will skip raising interest rates in its next meeting. The bill to suspend the $31.4 trillion debt ceiling on Wednesday passed with majority support from both Democrats and Republicans and will now head to the Senate, which must enact the measure before a Monday deadline, when the government is expected to run out of money to pay its bills. The Associated Press has the story:
Wall Street drifts as reports show split economy
Newslooks- NEW YORK (AP)
Stocks are drifting on Wall Street Thursday as reports painted a split U.S. economy. The job market remains remarkably solid, but manufacturing is weakening and shoppers of all kinds are feeling more pressure.
The S&P 500 was 0.4% higher in midday trading after eking out a third straight winning month. The Dow Jones Industrial Average was up 35 points, or 0.1%, at 32,944, as of 11:05 a.m. Eastern time, while the Nasdaq composite was 0.6% higher.
One positive for the market came late Wednesday when the House of Representatives approved a deal to prevent a possibly catastrophic default on the U.S. government’s debt. But that was what Wall Street expected, and only a trip-up for the deal before it gets signed by President Joe Biden would likely cause big waves for stocks.
Markets are more concerned about whether the economy will fall into a recession before inflation recedes enough to convince the Federal Reserve to take it easier on interest rates.
Reports on Thursday gave a clouded view. One said that fewer workers applied for unemployment benefits last week than expected, while another suggested employers increased their payrolls last month by more than forecast.
Both those are good news for workers and for the overall economy, which has been slowing under the weight of much higher interest rates. But a strong job market could also keep pressure up on inflation, pushing the Fed to keep rates high.
On the flip side, manufacturing is continuing to get hit hard, in part by higher interest rates. A report from the Institute for Supply Management said manufacturing shrank for a seventh straight month in May. The contraction was worse than both the prior month and what economists expected.
Following the reports, traders were largely betting on the Fed to hold rates steady at its next meeting in two weeks. That would be the first time in more than a year that it hasn’t hiked rates, and it’s something a Fed official a day earlier hinted may happen.
But traders are split on whether the Fed will follow up a possible pause with another hike to rates at its next meeting in July. High rates work to lower inflation by slowing the economy and hurting prices for stocks and other investments.
So far, the economy has held up despite such worries because of a still-strong job market and resilient spending by consumers. But reports from several retailers are showing shoppers feeling more pressure, all the way across the income spectrum.
Dollar General dropped 20.2% after it reported weaker profit and revenue for the latest quarter than analysts expected. It said the economic environment has been more challenging than it expected, and it cut its financial forecasts for the full year. It tends to cater to lower income households.
Macy’s, which also owns Bloomingdale’s stores, fell 2% after it slashed expectations for the year and fell short on sales and profit in the first quarter. It said shoppers began to pull back starting in March. That trend seems to be afflicting retailers across the spectrum.
Nordstrom rose 0.5% after reporting a surprise profit for the latest quarter. It said its customers, which include many upper-income households, were also feeling pressure.
“With the high-end customer, I guess we would say they’re pretty resilient, but they’re also cautious,” CEO Erik Nordstrom told analysts in a conference call late Wednesday. “And we’re seeing that really across the board, that caution.”
On the winning end was Hormel Foods, which rose 5.8% after reporting stronger profit for the latest quarter than expected. Its brands include Skippy, Spam and Applegate meats.
Several technology-oriented stocks also climbed, helping to prop up the larger market. They’re seen as some of the biggest beneficiaries of lower interest rates, and their big market values man they pack an inordinate amount of weight on the S&P 500 and other indexes. Apple rose 1%, and Amazon gained 0.9%.
Gains for Big Tech stocks have helped the S&P 500 rise this year, even when the majority of stocks have fallen. Some of the hottest action has been in artificial intelligence.
Some of that enthusiasm cooled after C3.ai gave a forecast for revenue this upcoming fiscal year that failed to wow Wall Street like Nvidia’s did last week. C3.ai said it expects to make between $295 million and $320 million, versus analysts’ expectations of roughly $317 million.
C3.ai tumbled 12.9%, though it’s still up more than 210% so far this year. Nvidia rose 3.7%.
In the bond market, the yield on the 10-year Treasury fell to 3.61% from 3.65% late Wednesday. It helps set rates for mortgages and other loans that influence the economy’s strength.
The two-year Treasury yield, which moves more on expectations for the Fed, fell to 4.37% from 4.40%.
In Europe, stock indexes were modestly higher after a report showed that inflation there took a positive turn, falling to 6.1%, though prices are still squeezing shoppers who are yet to see real relief in what they pay for food and other necessities.
Germany’s DAX was 1.1% higher, while France’s CAC 40 rose 0.6%.
Asian markets were mixed as worries remain about a weaker-than-expected recovery for the Chinese economy.
Hong Kong’s Hang Seng slipped 0.1%, while Japan’s Nikkei 225 rose 0.8%.
