U.S. stocks turned negative on Thursday as enthusiasm over Nvidia Corp’s quarterly results faded and strong economic data fueled concerns about more ambitious and longer-term monetary policy.
U.S. Treasury yields rose after the data was released.
The three main US stock indexes trended downward in the afternoon, with technology stocks being the only ones to have advanced among the 11 main sectors of the S&P 500 index.
“The market is at an all-time high, valuations are tight and we’re coming off the euphoria of Wednesday night’s Nvidia report,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Ky. .
“You saw it after the Fed reports, you saw it after a handful of really big data – and I think it’s the same with the NVIDIA results – you get this sort of initial explosion or selling associated with the initial reaction, then the market digests and recalibrates to expectations,” Mr. Mayfield added.
Semiconductor stocks received a shot of adrenaline from Nvidia, the large-cap chipmaker at the forefront of artificial intelligence optimism, when the company forecast quarterly revenue above estimates and announced a stock split.
On the economic front, S&P Global’s Flash PMI survey showed that U.S. business activity grew faster than economists expected in May.
The data is primarily viewed through the lens of the Fed, the timing of its first interest rate cut and the central bank’s ability to control inflation without triggering a recession.
“The flash PMI was higher than expected, giving wings to the hawks,” Mayfield added. The thinking therefore turned away from Nvidia and towards interest rates and the notion of “higher for longer”.
The Dow Jones Industrial Average lost 609.91 points, or 1.54%, to 39,061.13, the S&P 500 lost 44.34 points, or 0.84%, to 5,262.67 and the Nasdaq Composite lost lost 96.85 points, or 0.58%, to 16,704.70.
European stocks pared earlier gains to end nominally higher as optimism over Nvidia’s strong forecast was tempered by lower expectations for interest rate cuts.
The pan-European STOXX 600 index rose 0.07% and the MSCI index of stocks around the world lost 0.65%.
Emerging market stocks lost 0.44%. MSCI’s broadest index of Asia-Pacific stocks outside Japan closed 0.4% lower, while Japan’s Nikkei rose 1.26%.
U.S. Treasury yields rose after data suggested U.S. business activity accelerated and the labor market remains tight, supporting the Fed’s “higher for longer” narrative.
Benchmark 10-year bonds fell 11/32 to yield 4.4767%, compared with 4.434% last Wednesday.
The 30-year bond fell 17/32 to yield 4.5816%, compared to 4.55% late Wednesday.
The dollar gained ground against a basket of global currencies after a raft of U.S. and euro zone economic data.
The dollar index rose 0.14%, with the euro down 0.16% at $1.0804.
The Japanese yen weakened 0.06% against the greenback, to 156.89 per dollar, while the British pound traded at $1.2689, down 0.20% on the day .
Crude oil prices reversed earlier gains to record their fourth straight session as expectations that interest rates will remain restrictive for longer than expected raised the possibility of weakening US demand.
US crude oil fell 0.90% to settle at $76.87 per barrel, while Brent settled at $81.36 per barrel, down 0.66% on the day.
The price of gold fell to its lowest level in a week following the release of the Fed minutes.
Spot gold fell 1.8% to $2,335.19 an ounce.
