Dow Jones Industrial Average continues to fall as weak earnings and interest rate worries make investors nervous

U.S. stocks were headed for further declines on Thursday as persistent concerns about higher interest rates for a longer period and a sell-off in Salesforce (CRM) shares dampened investor sentiment.

The Dow Jones Industrial Average (^DJI) was down 0.8%, or about 350 points, after leading the stock market decline on Wednesday by dropping more than 400 points. The S&P 500 (^GSPC) was down 0.5%, and the tech-heavy Nasdaq Composite Index (^IXIC) was down about 0.4%.

Stocks lost momentum amid renewed pessimism about the possibility of interest-rate cuts fueled by data showing inflation is not as subdued as the Federal Reserve would like, while hopes that Nvidia's (NVDA) surprise earnings would spur a broader stock rally were dashed.

Worries about interest rates have pushed Treasury yields to their highest since early May this week, with the 10-year Treasury note (^TNX) topping 4.5%. The benchmark yield fell on Thursday but is still above key levels, trading around 4.6%.

Salesforce (CRM) earnings raised other concerns about potential losers from the AI boom: The software maker's shares fell 15% after it reported its revenue growth slumped to its lowest on record.

Meanwhile, the U.S. economy grew more slowly than initially thought in the first quarter. The Bureau of Economic Analysis' second estimate of first-quarter U.S. gross domestic product (GDP) showed the economy grew at an annualized rate of 1.3% during the period, down from 1.6% in its first estimate in April.

read more: How does the labor market affect inflation?

A flurry of retail profits before the close offered new clues about consumer resilience and the health of the economy. Shares of department store chain Kohl's (KSS) plummeted after an unexpected quarterly loss and a cut in its full-year sales outlook, while Best Buy (BBY) saw its same-store sales fall more than expected as Americans grow more cautious about spending on non-essential items.

live10 Updates

Thursday, May 30, 2024 at 8:49 a.m. PDT

Dollar General stock falls as retail theft hurts profits and stores eliminate self-checkouts

Dollar General (DG) shares fell as much as 4% during the company's earnings call on Thursday after an increase in “shrink,” industry slang for theft, impacted quarterly gross profits.

“Tracking continues to be our most significant headwind, declining 59 basis points in the first quarter compared to the same period a year ago,” Dollar General Chief Financial Officer Kelly Dilts told analysts on a conference call.

In total, the company has converted about 12,000 stores away from self-checkout.

Dollar General's net sales rose 6.1% to $9.9 billion in the first quarter of 2024, compared with $9.3 billion in the same period last year. Same-store sales increased 2.4% year over year.
Thursday, May 30, 2024 at 8:00 AM PDT

Costco hits record high before quarterly earnings announcement

Costco (COST) shares bucked the market's downward trend on Thursday to hit an all-time high ahead of the wholesale retailer's quarterly earnings, which are due to be released after the close.

Shares hit an intraday high of $816.95 during trading hours.

Yahoo Finance's Brooke DiPalma reports that Costco's foot traffic increased year over year, outperforming stores like Sam's Club (WMT) and BJ's Wholesale Club (BJ), according to Placer.ai. The company is expected to report Thursday afternoon that net sales rose 8.07% year over year to $57.98 billion and adjusted earnings rose 8% to $3.70.

Read more about Wall Street's expectations here.
Thursday, May 30, 2024 at 7:30 a.m. PDT

White House: Trump's tax cut extension would be an 'inflation bomb'

Ben Warschle of Yahoo Finance reports:

The White House will release a new public memo to allies on Thursday, seeking to link an extension of the Trump administration's tax cuts to a top concern for voters: inflation.

In a memo released to reporters and activists, White House senior deputy press secretary Andrew Bates said Republican efforts to extend and strengthen the 2017 tax cuts represent “MAGAnomics economic policies that will create an 'inflation bomb' and increase the burden on middle-class families.”

The memo was first provided to Yahoo Finance.

Please see here for the detail.
Thursday, May 30, 2024, 6:42 a.m. PDT

Nelson Peltz sells all Disney shares after losing proxy fight

Activist investor Nelson Peltz has sold his entire stake in Disney (DIS), according to sources familiar with the matter.

Peltz sold his stake for about $120 a share, making a profit of about $1 billion, the people said.

The development, first reported by CNBC, comes after Disney successfully fended off Peltz's demands to retain a seat on its board, formally ending a bitter proxy fight that has plagued the entertainment giant for months.

Peltz had been trying unsuccessfully to retain seats on Disney's board for himself and former Chief Financial Officer Jay Rasulo, but Disney announced at its annual shareholder meeting in early April that its current board members would remain in place after shareholder voters “widely” defeated its candidates.

Disney shares have risen about 12% since the beginning of the year but have fallen about 15% since the company defeated Peltz in the proxy fight.

Please see here for the detail.

Nelson Peltz, founding partner of Trian Fund Management LP, speaks during the WSJD Live conference in Laguna Beach, California, October 25, 2016. REUTERS/Mike Blake (Reuters/Reuters)
Thursday, May 30, 2024, 6:32 a.m. PDT

Salesforce shares fall 18% as Dow Jones Industrial Average falls 300 points

The Dow Jones Industrial Average (^DJI) fell about 300 points at the open due to a drop in Salesforce.com's (CRM) stock price.

Blue-chip indexes continued to fall on Thursday after dropping 400 points in the previous trading day. The S&P 500 (^GSPC) was down 0.3% and the tech-heavy Nasdaq Composite Index (^IXIC) was down 0.4%.

Shares of cloud-based software company Salesforce fell as much as 18% in open trading after the company missed second-quarter earnings guidance, raised concerns about the macroeconomic environment and delayed a deal closing.

AI chip darling Nvidia (NVDA) is soaring, but it's not buoying the broader market, as recent gains have been limited by growing concerns about higher interest rates for a long time amid shaky inflation.

The bond market is struggling as the 10-year Treasury note (^TNX) again surged above 4.5%, putting pressure on stocks.
May 30, 2024 (Thursday) 5:39 AM PDT

GDP: US economy grows slower than initially thought in Q1

The U.S. economy grew more slowly in the first quarter than initially thought.

The Bureau of Economic Analysis' second estimate of first-quarter gross domestic product (GDP) showed the economy growing at an annualized rate of 1.3 percent during the period, down from 1.6 percent in its first estimate in April but in line with economists' estimates.

The BEA said its update to first-quarter growth “largely reflects a downward revision in consumer spending,” which grew 2% in the first quarter, down from 2.5% in the previous quarter.

This figure was significantly lower than fourth-quarter GDP, which was revised upward to 3.4%.

The soft GDP reading comes at a time when inflation is proving stronger than expected and markets are sensitive to signs that the economy may be running hotter than the Federal Reserve would like.

But it's notable that many forecasters don't see the first-quarter slowdown in economic growth as the start of a broader trend. Goldman Sachs, in its release on Thursday, projected second-quarter growth at an annualized rate of 3.2%, while the Atlanta Fed's GDPNow forecasters are now predicting first-quarter growth at an annualized rate of 3.5%.

Bank of America US economist Michael Gapen said in a client note last Friday that his team expects a downward revision to first-quarter GDP figures but that this does not signal a concern for future economic growth.

“On balance, the economy slowed somewhat in the first quarter but remains stable overall,” Gapen wrote on Friday.
May 30, 2024 (Thursday) 5:22 AM PDT

Best Buy's terrible quarter

Yahoo Finance senior reporter Brooke DiPalma has all the numbers you need about Best Buy's (BBY) quarter here.

I'd like to add that Best Buy's performance this quarter was again truly awful.

The company's sales declines are piling up, and I believe there may be structural issues the business cannot overcome. Sales pressures have been going on for about two years. I also believe management may need a fresh perspective after this holiday shopping season is over.

Best Buy continues to have a tough sales quarter. (Best Buy)
May 30, 2024 (Thursday) 2:21 AM PDT

Follow-up: Chewy

Chewy (CHWY) made an appearance on these live blog pages on Wednesday, and rightly so.

The stock surged 27% (though it was slightly lower in premarket trading today) following the better-than-expected quarterly results. The reaction was somewhat surprising, as the company's closely watched active customer metric fell again year over year, and in fact the rate of decline accelerated compared to the rate of decline in the previous quarter.

Nevertheless, Wall Street was enthusiastic about the company's comments about expanding profit margins and an improving demand environment.

We had an in-depth interview with Chewy CEO Sumit Singh (see full interview below), in which he reiterated the improving demand backdrop.

It's interesting to note that the company seems to be fully committed to opening veterinary clinics: it is currently operating four veterinary clinics that opened in the first quarter, with four more planned to open by the end of the year.

The company lags far behind Mars Inc., which operates thousands of veterinarians (it has been buying and integrating family-run practices in the sector), but the opportunity here is for Chewy to offer a better environment for care that's aligned with the services and products it sells online.

What's even more noteworthy is that the company has begun testing a paid membership program.
Thursday, May 30, 2024, 2:11 a.m. PDT

Trend Watch: PC Demand Cycle

Shares of HP Inc. (HPQ) are up 3% in pre-market trading after the company reported better-than-expected quarterly results last night.

Speaking with HP CEO Enrique Lores after the results were announced (see the full interview below), what struck me was that the company called on businesses to upgrade their computers ahead of the end of support for Windows 10. It seems that a race is on to replace computers ahead of that moment in October 2025.

HP's first AI PC, unveiled this month, is likely to accelerate the upgrade cycle even further.

“We continue to believe HPQ is well positioned to benefit from the PC upturn, which should accelerate in the second half of the year and FY25,” Evercore ISI analyst Amit Daryanani wrote in a client note this morning.
May 30, 2024 (Thursday) 2:05 AM PDT

Salesforce crashes

Shares of Salesforce (CRM) fell as much as 16% in pre-market trading.

The rush to sell is justified.

Salesforce missed targets on key performance indicators, posting 10% growth compared with 11% expected, and the conference call was peppered with concerns about the macro environment that is slowing deal closings.

The company's second-quarter guidance, which fell short of consensus, reflects these concerns (a good thing for management).

“While Q1 was a consistently weak quarter for software, the magnitude of the miss in expectations could suggest more idiosyncratic issues (seat exposure, downsell, competition) that could continue to weigh on the business in Q2, especially with FY2025 revenue now looking aggressive (suggesting second-half acceleration versus Q2),” Citi analyst Tyler Radke wrote in a client note. “While valuations aren't particularly steep at 20x EPS and 18x enterprise value/free cash flow (FY2025 forecast), slowing growth, lack of forecast de-risking, and active M&A suggest we're more comfortable staying on the sidelines waiting for improved growth and/or further evidence of data cloud/GenAI momentum/monetization.”

Overall, it was a disappointing quarter for Salesforce, and the stock is likely to remain in the penalty box until there are signs of a more stable macro environment.