US open: Stocks sink as markets continue to retreat from record highs

30th May 2024 14:55

(Sharecast News) - US stock markets opened firmly lower on Thursday as elevated bond yields and a mixed outlook for the economy eroded investors' appetite for risk.

By 1000 EDT, the Dow was trading nearly 400 points lower, down 1% at 38,063, with the index falling for the sixth time in eight days since topping the 40,000 mark for the first time on 17 May. The S&P 500 and Nasdaq meanwhile were registering losses around 0.3-0.4%, with both also retreating from recent record highs.

David Morrison, senior market analyst at Trade Nation, said that much of positive market sentiment seen at the beginning of May "appears to be fizzling out".

"Sentiment has taken a knock this week thanks to a big jump in yields on US Treasuries. The question now is whether this pullback is the start of a larger retreat, or a minor hiccup before the market recovers its poise in preparation for further gains," he said.

The 10-year US Treasury yield had slipped slightly by the open on Wall Street, by five basis points to 4.57%, having earlier topped the 4.6% mark for the first time in four weeks. That follows a round of poor Treasury sales earlier in the week, with the two, five and seven-year notes seeing weak demand.

Economic data paints mixed picture

There was a flurry of economic indicators released on Thursday, as investors await the Federal Reserve's preferred gauge of inflation on Friday. The price deflator for personal consumption expenditures, or PCE, is predicted to have held steady at 2.8% in April.

Back to Thursday's schedule, according to the Department of Labor, the seasonally adjusted number of initial unemployment claims over the week ended 24 May increased by 3,000 to 219,000, more or less in line with economists' expectations.

US gross domestic product expanded at a revised annualised pace of 1.3% over the three months ending in March, according to the Department of Commerce. This was down from the initial reading of 1.6% due to lower-than-estimated consumer spending, and well below the 3.4% expansion seen in the fourth quarter.

Meanwhile, US pending home sales slumped 7.7% in April, the biggest monthly drop since September 2022, reversing the 3.6% gain seen in March. The consensus estimate was for a fall of just 0.6%.

Market movers

Salesforce was down 20% after the company cited "elongated deal cycles, deal compression and high levels of budget scrutiny" that impacted first-quarter results, with revenues rising a less-than-expected 11% to $9.13bn. Sales guidance for the current quarter also disappointed.

Another notable faller was software group UiPath which plunged 35% after the abrupt exit of its CEO, leading to the reappointment of its co-founder who stepped down earlier this year. The company also missed forecasts with its second-quarter guidance by a long way.

PC maker HP was rising strongly after topping earnings estimates for its fiscal second quarter, while software group Pure Storage beat forecasts comfortable with its first-quarter profits.