Dow futures slide again as rates fears prey on nerves

By Investor Empires On May 30, 2024

US stocks headed for further losses on Thursday, as lingering concerns about rising long-term interest rates and Salesforce (CRM) sales dampened investor sentiment.

Dow Jones Industrial Average futures (YM=F) fell 0.9%, after losing more than 400 points to lead a stock market decline on Wednesday. Standard & Poor's 500 futures (ES=F) fell 0.4%, while contracts on the tech-heavy Nasdaq 100 index fell nearly 0.3%.

Stocks lost momentum amid renewed gloom over the prospect of interest rate cuts, weighed down by data showing a slower slowdown in inflation than the Federal Reserve wants. At the same time, hopes that Nvidia's (NVDA) huge earnings would spur a broader stock rally were dashed.

Concern over interest rates pushed US bond yields this week to their highest levels since early May, lifting the 10-year Treasury note (^TNX) back above 4.5%. Although the benchmark yield fell on Thursday, it is still holding above a key level of around 4.6%.

Salesforce's results have raised further concerns about potential losers in the AI boom. Shares of the software maker fell 15% in premarket after it said sales growth would stall to the slowest in its history.

The focus is now on Thursday's data, as investors watch for more signs of surprising resilience in the US economy that are derailing the Federal Reserve's efforts to lower borrowing costs. There is a second reading of first quarter GDP and weekly unemployment claims.

Read more: How does the labor market affect inflation?

A wave of retail earnings before the bell provided further evidence of consumer resilience and economic health. Shares of Kohl's (KSS) collapsed after the department store chain's surprise quarterly loss and cut of its annual sales forecast. Meanwhile, Best Buy (BBY) posted a larger decline in comparable sales than expected as Americans become selective about spending on non-essentials.

He lives4 updates

Thursday, May 30, 2024 at 8:22 AM EST

Terrible quarter from Best Buy

Yahoo Finance Senior Reporter Brooke DiPalma has all the numbers you need on the Best Buy (BBY) quarter here.

I would just add this quarter from Best Buy back.

Sales declines are piling up for the company, which makes me wonder if there are structural problems the company can't overcome. The sales pressure has now continued for two years or so. I also wonder if fresh eyes will be needed in the executive suite after the upcoming holiday shopping season.

Best Buy's tough sales periods continue. (Best Buy)
Thursday, May 30, 2024 at 5:21 AM EST

Follow up: rubber

Chewy (CHWY) found its way onto these live blog pages on Wednesday, and deservedly so.

Shares exploded 27% on the back of a better-than-expected quarter (shares were down a bit in the pre-market today). The response surprised me a bit as the company's closely watched active customer metric has declined again year over year. In fact, the decline accelerated versus the decline we saw in the previous quarter.

However, the Street was consumed with the company's margin expansion and commentary on the improving demand environment.

We caught up with Chewy CEO Sumit Singh in a wide-ranging interview on Yahoo Finance Live (watch full below), where he echoed this improvement in the demand backdrop.

I found it interesting that the company is featured in veterinary clinic openings. It now has four in operation that opened in the first quarter, and four more on the way by the end of the year.

The company lags far behind Mars, which manages thousands of veterinarians (it has been a consolidator in the space, buying up family-run practices). But there's an opportunity here for Chewy to provide a better nurturing environment that ties into the services and products it sells online.

Also to watch: The company has begun testing a paid membership program.
Thursday, May 30, 2024 at 5:11 AM EST

Trend monitoring: Demand cycle for computers

(HPQ) shares of HP Inc. (HPQ) is up 3% heading into the market after a better-than-expected quarter last night.

Of everything I talked about with HP CEO Enrique Lores (full interview below) after the results, it was his call for companies to upgrade PCs before withdrawing support for Windows 10 in October 2025 that left an impression. It appears that the race is on to replace computers before that moment.

The introduction of HP's first batch of AI-powered PCs to the market this month will likely add more gas to this upgrade cycle.

“We continue to believe HPQ remains well positioned to capitalize on PC recycling, which should only accelerate in the second half and into FY25,” EvercoreISI analyst Amit Daryanani wrote in a client note this morning.
Thursday, May 30, 2024 at 5:05 AM EST

Salesforce crashes

Salesforce (CRM) shares are taking a pre-market hit of up to 16%.

Sale guaranteed.

Salesforce missed the key performance commitments measure, showing growth of 10% versus estimates of 11%. The conference call was filled with concerns about the macro environment, which is driving deal signings.

The non-consensus Q2 guidance reflects these concerns (hopefully for management's sake).

“Although the first quarter was consistently weaker for software, the magnitude of the failure may indicate more unique issues (seat exposure, declining sales, competition) that could continue to impact the business in the second quarter, especially as fiscal year revenue 25 now looks strong (implying H2 acceleration vs. Q2),” Citi analyst Tyler Radke said in a client note. “Valuation is lenient at 20x EPS, 18x enterprise value/free cash flow (FY25 estimates), but with slower growth, lack of risk-free valuations and more active M&A, we are comfortable on the margins waiting for improvement.” Growth or more evidence of cloud/GenAI/monetization momentum.”

Overall, a surprise quarter from Salesforce didn't send a telegram. The stock will likely remain in the box until signs of a more stable macro backdrop emerge.

Dow futures slide again as rates fears prey on nerves

Terrible quarter from Best Buy

Follow up: rubber

Trend monitoring: Demand cycle for computers

Salesforce crashes