Yahoo Finance Dow falls by more than 600 points as traders worry rate cuts are not near
May 23 (UPI) -- The Dow Jones Industrial Average fell by more than 600 points Thursday, registering its worst day of 2024 as all three major indexes dropped.
Despite Nvidia's 9.3% jump, the chipmaker and artificial intelligence darling couldn't carry the broader market.
Aircraft manufacturer Boeing fell 7.5%, putting the most stress on markets. The company said its cash flow was lower than expected this year, causing investors to fear its debt ratings could be classified as junk bonds.
After reaching record highs earlier in the day, the S&P 500 and the Nasdaq Composite fell 0.74% and 0.39% respectively.
Nvidia shares closed at 1,37.99, up $88.49, or 9.3%, after the company posted stronger than expected first-quarter earnings and announced a 10-for-1 stock split.
With a market cap of more than $2.3 trillion, Nvidia also has a strong influence on the S&P 500, but it wasn't enough to compensate for the more than 400 stocks in the index that dropped. Information technology was the only positive sector Thursday.
"Tech is the only industry sector not in the red," Louis Navellier of Navellier Investing wrote to clients. "If you don't have NVIDIA in your index, it's not a good day."
Stronger than expected economic data indicated the economy is not being held back by inflation, causing investors to lose hope that the Federal Reserve would cut interest rates this year.
"In theory, a stronger economy should be good for companies, and thus stocks, but because we are all so obsessed with the Federal Reserve and other central bank policymakers, we see most stocks trending lower as bond prices fall." Interactive Brokers chief strategist Steve Sosnick wrote in a memo.
The Purchasing Managers Index for May rose 3.5%, the highest it has been since June, while investors expected it to fall slightly.
Labor market data also beat investor predictions, with weekly initial jobless claims at 215,000, lower than an anticipated 220,000, according to FactSet data.
According to the CME FedWatch tool, traders predict there is a 51% chance the Fed will cut rates in September, down from 58% Wednesday and almost 68% a week ago. When chances fall below 60%, its no longer likely that the Fed will go forward.
Investors now anticipate just one cut this year for December, which is down from six that were predicted at the beginning of the year.
