Stocks Tumble as Salesforce Suffers Worst Day in Two Decades Amid Inflation Concerns

Vida Markets

Friday 31st May 2024, 12:52 pm Time to read: 6 mins.

Despite a challenging, holiday-shortened trading week, US stocks closed lower on Thursday, led by a dramatic plunge in Salesforce shares, marking its worst day in nearly 20 years. This decline overshadowed gains in other areas, as the Dow Jones Industrial Average dropped over 300 points and the Nasdaq Composite dipped significantly. Investors remain cautious, eyeing

Despite a challenging, holiday-shortened trading week,  US stocks closed lower on Thursday, led by a dramatic plunge in Salesforce shares, marking its worst day in nearly 20 years. This decline overshadowed gains in other areas, as the Dow Jones Industrial Average dropped over 300 points and the Nasdaq Composite dipped significantly. Investors remain cautious, eyeing upcoming key  US inflation data while grappling with rising Treasury yields and their impact on market sentiment. Despite these setbacks, the broader indexes are poised to end May on a high note, reflecting a mixed market environment characterized by both risk aversion and underlying optimism.

Key Takeaways:

Dow, S&P 500 and Nasdaq Dip: The Dow Jones Industrial Average slid 330 points, or 0.9%, to close at 38,111.48, heavily impacted by Salesforce's significant decline. The S&P 500 lost 0.6% to finish at 5,235.48, while the Nasdaq Composite dropped 1.1% to end at 16,737.08, reflecting widespread market pressure.
Treasury Yields and Russel 2000 Impact: The 10-year Treasury yield remained above 4.5%, reducing investor appetite for equities and contributing to market volatility, despite slipping below 4.6% on Thursday. Contrary to the broader market, the small cap-focused Russell 2000 index traded up around 1%, showcasing resilience in smaller stocks.
European Market Strength: European stocks closed higher, with the Stoxx 600 index up 0.63%. The UK's FTSE 100 increased by 0.64%, Germany's DAX by 0.22%, and France's CAC 40 by 0.57%, despite global market pressures. Meanwhile Spain's inflation rose to 3.6% in May, up from 3.3% in April, with core inflation at 3%, indicating persistent price pressures in the eurozone.
Asian Markets Decline: Asian-Pacific markets fell, with South Korea's Kospi down 1.56% to 2,635.44 and the smaller cap Kosdaq slipping 0.77% to 831.99. Japan's Nikkei 225 dropped 1.3%, closing at 39,244.68, while the broader Topix declined 0.56%. Hong Kong's Hang Seng index plunged 1.26%, and mainland China's CSI 300 index lost 0.53%, closing at 3,594.31.
Oil Prices Drop:  US crude oil fell over 1% with West Texas Intermediate (WTI) July contract down $1.28, or 1.63%, to $77.95 a barrel, and Brent July contract down $1.34, or 1.6%, to $82.26 a barrel.  US crude oil is down 4.8% in May, marking its worst month since December, while Brent has lost 6.5%, indicating weak gasoline demand as the summer driving season begins.
FX Today:

GBP/USD Recovers Above 1.2700 Amid Soft US Dollar: The GBP/USD pair rebounded to 1.2730, gaining 0.20% after dipping to a weekly low of 1.2680. Despite the recovery, the pair remains in a narrow trading range. A bullish continuation requires surpassing the March 21 daily high of 1.2803, aiming for the year-to-date high of 1.2893 and the significant 1.3000 resistance level. On the downside, key support levels include 1.2674 and the 50-day moving average at 1.2580.
USD/JPY Slips Below 157.00 Amid Bearish Patterns: The USD/JPY pair declined from weekly highs of 157.71, down 0.30%. The technical outlook remains neutral to upward, with resistance at 157.00 and 157.71 potentially paving the way for further gains to 158.00 and the year-to-date high of 160.32. Conversely, a bearish pattern could push the pair below the level at 156.76, challenging the 156.00 mark.
USD/CAD Faces Resistance at 1.3660: The USD/CAD pair retreated to familiar levels near 1.3660 after peaking at 1.3735 on Wednesday. It encountered near-term technical resistance at the 200-hour Exponential Moving Average (EMA) at 1.3670, with support at this week’s low of 1.3615. The pair remains in a consolidation phase near the 50-day EMA at 1.3645, with long-term support at the 200-day EMA at 1.3560.
AUD/USD Bounces into Resistance: The AUD/USD pair corrected higher, reversing most of the previous day's declines. The price moved into a resistance range between 0.6635 and 0.6647, which includes the 100 and 200 hour moving averages near 0.6640. Moving above 0.6647 would increase the bullish bias, while dropping below 0.6635 would give sellers confidence for additional downside probing.
GBP/JPY Drops to New Weekly Low Below 200.00: The GBP/JPY extended losses for the second consecutive day, trading at 199.68, down 0.24%. A drop below 199.03 could sponsor a dip to 197.54 and further losses below 197.00. On the other hand, reclaiming the 200.00 level could renew buying interest, challenging the year-to-date high of 200.74.
Gold Shines Again Amid Weakened  US Economic Growth: The XAU/USD pair trades at $2,347, bouncing off daily lows of $2,322. If XAU/USD buyers reclaim the psychological mark of $2,350, the next target would be $2,400, followed by $2,450 and later $2,500. Conversely, if XAU/USD falls below the 50-day Simple Moving Average (SMA) at $2,321, it could pave the way to challenge the $2,303 area, followed by the next low of $2,277.
Silver Price Analysis: Silver prices (XAG/USD) dropped from daily highs of around $32.09 earlier, trading towards $31.00. If silver drops below $31.00, further losses lie beneath, with the next support at $30.05, followed by $29.79. Once cleared, the next stop would be the $29.00 psychological level. On the flip side, if buyers maintain silver spot prices above $31.00, it would pave the way for consolidation around the $31.00/$32.00 range.
Market Movers:

Salesforce Tumbles: Salesforce experienced a dramatic decline of 19.7% after reporting weaker-than-expected revenue for the fiscal first quarter and issuing a disappointing outlook. The company posted revenue of $9.13 billion, falling short of the $9.17 billion anticipated by analysts, marking its worst session since 2004.
Kohl’s Plunges: Kohl's shares dropped 22.8% after reporting a first-quarter loss of $0.24 per share, contrary to analyst expectations of a $0.04 gain. Revenue also fell below expectations, intensifying concerns about the department store chain's financial health.
Zscaler Surges: Zscaler's shares jumped 14.9% after the cloud security company exceeded third-quarter expectations. The firm reported adjusted earnings of $0.88 per share on revenue of $553 million, surpassing the anticipated earnings of $0.66 per share on revenue of $536 million.
Dell Technologies Declines: Despite beating first-quarter expectations, Dell Technologies saw a 14.3% decline in its stock. The company reported adjusted earnings of $1.27 per share on revenue of $22.24 billion, compared to the forecasted $1.26 per share on $21.64 billion.
Gap Soars: Gap's stock surged 19.6% following a strong fiscal first-quarter performance, reporting earnings of $0.41 per share on revenue of $3.39 billion. Analysts had expected earnings of $0.14 per share on revenue of $3.29 billion, boosting investor confidence.
HP Gains 17%: HP's shares rose 16.8% a day after reporting better-than-expected quarterly results. The company posted fiscal second-quarter earnings per share of $0.82 on revenue of $12.8 billion, exceeding the expected $0.81 per share on revenue of $12.60 billion.
Best Buy Pops Over 13%: Best Buy's stock increased by 13.4% after reporting fiscal first-quarter earnings of $1.20 per share, surpassing the expected $1.08 per share. The company maintained its full-year forecast, with CEO Corie Barry noting expectations of increasing industry stabilization in 2024.
Burlington Stores Jumps 17%: Burlington Stores saw its shares rise 17% following an earnings beat. The retailer reported adjusted earnings per share of $1.42 for the first quarter, significantly higher than the expected $1.05, with revenue of $2.36 billion, exceeding the anticipated $2.34 billion.
Nutanix Drops 23%: Nutanix shares fell 23% after providing a fiscal fourth-quarter revenue forecast that fell short of expectations. Despite beating earnings and sales expectations for its fiscal third quarter, the company's future outlook concerned investors.
Dollar General Sheds 8%: Dollar General's stock declined by 8.1% despite reporting an earnings and revenue beat for its first quarter. The company projected second-quarter earnings per share between $1.70 and $1.85, below the expected $1.92, raising concerns about future performance.
Costco Wholesale Slips 1.4%: Costco Wholesale's shares slid 1.4% even after reporting fiscal third-quarter earnings and revenue that surpassed expectations. The company posted earnings of $3.78 per share on revenue of $58.52 billion, compared to the forecasted $3.70 per share on $58.07 billion in revenue.
Foot Locker Jumps 15%: Foot Locker's stock rose 15% after reporting an earnings beat for the first quarter. The retailer posted earnings per share of $0.22, surpassing the consensus estimate of $0.12 per share.
UiPath Sinks 34%: UiPath's shares dropped 34% after announcing a revenue forecast for the second quarter lower than expected and the resignation of CEO Rob Enslin, effective June 1. The company's full-year revenue guidance also fell short of expectations.
As the trading month comes to a close, the significant declines in major indexes highlight a market grappling with mixed economic signals and investor sentiment. The sharp drop in Salesforce and pullbacks in key tech stocks like Nvidia have underscored the volatility that remains, despite a month of overall gains for the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average. Rising Treasury yields and disappointing corporate earnings reports from giants like Kohl’s and Dell have further contributed to the market's cautious outlook. Investors are now closely watching for the upcoming personal consumption expenditures price index report, a crucial indicator for the Federal Reserve's inflation targeting.

 

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