Dow Likely To See Further Downside Amid Steep Drop By Salesforce

The major U.S. index futures are currently pointing to a lower open on Thursday, with the Dow futures showing a notable move to the downside.

A steep drop by shares of Salesforce (CRM) is likely to weigh on the Dow, as the cloud-based software company is plunging by 16.5 percent in pre-market trading.

Salesforce is under pressure after reporting weaker than expected fiscal first quarter revenues and providing disappointing fiscal second quarter guidance.

Concerns about the outlook for interest rates may also continue to weigh on the markets, although a pullback by treasury yields may help keep selling pressure somewhat subdued.

The futures regained some ground following the release of separate reports showing an uptick by weekly jobless claims and slower than previously GDP growth in the first quarter.

The Labor Department said initial jobless claims rose to 219,000 in the week ended May 25th, an increase of 3,000 from the previous week’s revised level of 216,000.

Economists had expected jobless claims to inch up to 218,000 from the 215,000 originally reported for the previous week.

Meanwhile, the Commerce Department said gross domestic product climbed by 1.3 percent in the first quarter compared to the previously reported 1.6 percent jump.

The downwardly revised increase, which was in line with economists, compares to the 3.4 percent surge in GDP in the fourth quarter of 2023.

Following the mixed performance seen during Tuesday’s session, the major U.S. stock indexes all moved to the downside during trading on Wednesday. The Dow showed a notable decline, falling to its lowest closing level in almost a month.

The major averages all finished the day firmly in negative territory. The Dow slumped 411.32 points or 1.1 percent to 38,441.54, the S&P 500 slid 39.09 points or 0.7 percent to 5,266.95 and the Nasdaq fell 99.30 points or 0.6 percent to 16,920.58.

The weakness on Wall Street came amid a continued increase by treasury yields, with the yield on the benchmark ten-year note climbing to its highest levels in nearly a month.

The ten-year yield jumped above 4.5 percent on Tuesday, as auctions of two-year and five-year notes attracted well below average demand.

The continued advance by treasury yields has added to recent concerns about the outlook for interest rates ahead of key inflation data later in the week.

On Friday, the Commerce Department is due to release its report on personal income and spending in the month of April, which includes readings on inflation said to be preferred by the Federal Reserve.

The inflation data could have a significant impact on the outlook for interest rates ahead of the Fed’s next monetary policy meeting on June 11-12.

In an interview with CNBC on Tuesday, Minneapolis Fed President Neel Kashkari said he needs to see “many more months of positive inflation data” before he would consider cutting interest rates.

Kashkari, who does not have a vote on the rate-setting Federal Open Market Committee this year, also said he could not rule out raising interest rates if inflation fails to slow.

Traders may also have been cashing on recent strength in the tech sector, which drove the Nasdaq to a new record closing high on Tuesday amid a surge by shares of Nvidia (NVDA).

A pullback by the price of crude oil led to considerable weakness among energy stocks, dragging both the NYSE ARCA Oil Index and the Philadelphia Oil Service Index down by 2.2 percent.

Airline stocks also saw substantial weakness on the day, with the NYSE Arca Airline Index plunging by 2.0 percent to a nearly six-month closing low.

America Airlines (AAL) led the sector lower, plummeting by 13.5 percent after the airline lowered its second quarter earnings guidance.

Gold stocks also saw significant weakness amid a decrease by the price of the precious metal, moving notably lower along steel, semiconductor and telecom stocks.

Commodity, Currency Markets

Crude oil futures are slipping $0.24 to $78.99 a barrel after falling $0.60 to $79.23 a barrel on Wednesday. Meanwhile, after sliding $15.20 to $2,364.10 an ounce in the previous session, gold futures are inching up $1.50 to $2,342.70 an ounce.

On the currency front, the U.S. dollar is trading at 156.63 yen versus the 157.64 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0827 compared to yesterday’s $1.0801.

Asia

Asian stocks ended deep in the red on Thursday, as the dollar and U.S. bond yields continued to surge on bets that global interest rates will stay higher for longer.

Traders also looked ahead to the release of key inflation readings from the eurozone and the U.S. for additional clues on the future path of monetary policy.

The U.S. core personal consumption expenditures (PCE) price index report will be released on Friday following signs of softening price pressures in the recent CPI survey.

The Japanese yen tried to recoup from a four-week trough as Japanese 10-year treasury yields spiked to 13-year highs.

Gold and oil prices were slightly lower in Asian trading, as Israel’s national security adviser Tzachi Hanegbi appeared to reject the idea of a quick end to the war.

China’s Shanghai Composite Index dropped 0.6 percent to 3,091.68 as the International Monetary Fund upgraded the country’s 2024 and 2025 GDP growth forecasts but warned of risks ahead.

Hong Kong’s Hang Seng Index tumbled 1.3 percent to 18,230.19 ahead of the release of China’s official Purchasing Managers Index data for May.

Japanese markets fell sharply as domestic government bond yields notched fresh multi-year peaks on expectations of another rate hike by the Bank of Japan.

The Nikkei 224 Index slumped 1.3 percent to 38,054.13, extending losses for a third consecutive session and hitting a one-month low. The broader Topix Index closed 0.6 percent lower at 2,726.20.

Top technology stocks bore the brunt of selling, with Advantest plunging 6.1 percent. Peer Tokyo Electron, SoftBank Group and Uniqlo parent firm Fast Retailing all fell over 2 percent.

Seoul stocks retreated ahead of industrial production figures due on Friday. The Kospi settled 1.6 percent lower at 2,635.44, dragged down by technology stocks.

Market bellwether Samsung Electronics lost 2.3 percent and No. 2 chipmaker SK Hynix plummeted 3.4 percent.

Australian markets ended down for a third straight session after April inflation data stoked speculation of another interest rate hike by the Reserve Bank.

The benchmark S&P ASX 200 Index fell 0.5 percent to 7,628.20, while the broader All Ordinaries Index closed half a percent lower at 7,895.90.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index slumped 1.0 percent to 11,557.21 amid concerns the Federal Reserve is unlikely to cut rates any time soon.

Europe

European stocks are seeing modest gains on Thursday after two days of selling on inflation and interest rate concerns.

Unemployment across the eurozone has fallen to a new record low in April, while a measure of economic sentiment ticked up in May, separate data showed earlier today.

Eurostat data showed the euro-area seasonally adjusted unemployment rate fell from 6.5 percent to 6.4 percent in April, below expectation of 6.5 percent. The euro area economic sentiment indicator ticked up from 95.6 to 96.0 in May, matching expectations.

While the U.K.’s FTSE 100 Index has risen by 0.4 percent, the French CAC 40 Index is up by 0.3 percent and the German DAX Index is up by 0.1 percent.

Italy’s Banco BPM has rallied. CEO Giuseppe Castagna said that there are “no conditions today” to merge with rival lender Monte dei Paschi.

Auto Trader Group, a leading automotive trading place, has also surged after reporting full-year results ahead of expectations.

Shares of De La Rue have also jumped. The banknote maker confirmed discussions with a number of certain parties, who have made proposals in relation to, or expressed interest in, either of the Group’s divisions.

VINCI shares have also risen in Paris. The French concessions and construction company announced that it has received a new works contract worth A$159 million or approximately 96 million euros for Melbourne Airport in Australia.

Bayer shares have also advanced. The German pharmaceutical and life sciences major announced that its clinical stage cell therapy unit BlueRock Therapeutics LP’s investigational cell therapy bemdaneprocel to treat Parkinson’s disease has received the U.S. FDA’s Regenerative Medicine Advanced Therapy designation.

Meanwhile, telecommunications firm Telecom Italia has slumped despite posting higher revenue for the first quarter and backing its full-year guidance.

Science and technology major Merck KgaA has also declined. The company has signed a non-binding MOU with the Korea Advanced Institute of Science and Technology to further progress in life sciences advance scientific collaboration.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits crept modestly higher in the week ended May 25th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims rose to 219,000, an increase of 3,000 from the previous week’s revised level of 216,000.

Economists had expected jobless claims to inch up to 218,000 from the 215,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also edged up to 222,500, an increase of 2,500 from the previous week’s revised average of 220,000.

Meanwhile, revised data released by the Commerce Department on Thursday showed U.S. economic growth slowed by more than previously estimated in the first quarter of 2024.

The Commerce Department said gross domestic product climbed by 1.3 percent in the first quarter compared to the previously reported 1.6 percent jump.

The downwardly revised increase, which was in line with economists, compares to the 3.4 percent surge in GDP in the fourth quarter of 2023.

The slower than previously estimates growth reflected downward revisions to consumer spending, private inventory investment and federal government spending.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of April. Pending home sales are expected to decrease by 0.6 percent in April after surging by 3.4 percent in March.

The Energy Information Administration is due to release its report on oil inventories in the week ended May 24th at 11 am ET. Crude oil inventories are expected to fall by 1.9 million barrels after rising by 1.8 million barrels in the previous week.

At 12:05 pm ET, New York Federal Reserve President John Williams is scheduled to speak before a hybrid Signature Luncheon event hosted by the Economic Club of New York.

Dallas Federal Reserve Bank President Lorie Logan is due to speak before the Borderplex Alliance Distinguished Speaker Series at 5 pm ET.

Stocks In Focus

Shares of Kohl’s (KSS) have plummeted in pre-market trading after the department store chain reported an unexpected fiscal first quarter loss on weaker than expected revenues.

Software company UiPath (PATH) is also seeing a pre-market nosedive after reporting fiscal first quarter results that exceeded estimates but providing disappointing guidance. The company also announced the resignation of CEO Rob Enslin.

Meanwhile, shares of Foot Locker (FL) are also likely to see initial strength after the apparel and footwear retailer reported better than expected fiscal first quarter results.

Identity and access management company Okta (OKTA) may also move to the upside after Evercore ISI upgraded its rating on the company’s stock to Outperform from In-Line.