Wall Street edges back from records after Dow briefly tops 40,000
U.S. stocks edged back from their record heights Thursday after the Dow Jones industrial average briefly topped the 40,000 level for the first time.
The Dow slipped 38.62 points, or 0.1%, to 39,869.38. The Standard & Poor’s 500 index, which is much more widely followed on Wall Street, dipped 11.05, or 0.2%, to 5,297.10, and the Nasdaq composite fell 44.07, or 0.3%, to 16,698.32. All three indexes had rallied Wednesday to all-time highs.
Machinery maker Deere weighed on the market and sank 4.7% despite reporting stronger profit for its latest quarter than expected. It cut its profit forecast for this fiscal year, below analysts’ estimates, as farmers buy fewer tractors and other equipment.
Home builders also helped drag the market lower after a weaker-than-expected report on the housing industry. They gave back some of their big gains from the day before, when hopes for lower mortgage rates had sent them sharply higher. D.R. Horton sank 4.2%, Lennar fell 3.3% and PulteGroup dropped 2.8%.
Also sinking were GameStop and AMC Entertainment, which slid for a second straight day after their jaw-dropping starts to the week. They’ve been moving more on excitement drummed up by investors than any changes to their financial prospects.
GameStop fell 30%, though it’s still up nearly 59% for the week. AMC Entertainment lost 15.3%.
Such drops helped offset a 7% jump for Walmart, which reported stronger profit for the latest quarter than analysts expected. The retailer also said its revenue for the year could top the forecast range it had earlier given.
Walmart’s strength could be an encouraging signal for the broader economy. Worries have been rising about whether U.S. households can keep up with still-high inflation and more expensive credit card payments, particularly households at the lower end of the income spectrum.
Target, which reports its quarterly results next week, climbed after Walmart’s report, along with other retailers such as Dollar General and Dollar Tree. Each added at least 2%.
Chubb rose 4.7% after Warren Buffett’s Berkshire Hathaway disclosed it had built an ownership stake in the insurer.
Sportswear maker Under Armour swung between losses and gains after it warned that its revenue will be likely down by “a low double-digit percentage rate” this fiscal year, citing weaker demand from wholesalers and “inconsistent execution across our business.”
The company announced a restructuring plan to cut costs and also announced a program to buy back up to $500 million of its stock. It dropped 1.3%.
Stronger-than-expected profit reports have been one of the main reasons U.S. stock indexes have broadly jumped through May to records after a tough April. Another has been revived hopes that the Federal Reserve will be able to cut its main interest rate at least once this year. The Fed has been keeping its federal funds rate at the highest level in more than two decades.
A string of worse-than-expected reports on inflation at the start of the year had put the potential for such cuts in jeopardy, but some more encouraging data have since arrived.
Treasury yields have largely eased in May as hopes rose that the economy could hit the hoped-for sweet spot, at which it cools enough because of high interest rates to stifle inflation but not so much that it falls into a recession.
Yields rose Thursday after some mixed data on the economy, including the report that hurt home builder stocks, which showed the industry broke ground on fewer projects than expected.
One report showed slightly more workers applied for unemployment benefits last week than economists expected, though the number remains low historically. Others said that manufacturing growth in the mid-Atlantic region was weaker than hoped and that import prices rose more than forecast.
“Today’s numbers were in line with the overall theme of the week — nothing dramatic, but showing signs of a steady-to-cooling economy,” said Chris Larkin, managing director for trading and investing at E-Trade From Morgan Stanley.
The yield on the 10-year Treasury climbed to 4.37% from 4.35% late Wednesday. The two-year yield, which moves more closely with expectations for action by the Fed, rose to 4.79% from 4.72%.
In stock markets abroad, indexes were modestly lower in much of Europe after mostly rising in Asia. Hong Kong’s Hang Seng jumped 1.6% after reopening following a holiday, while Japan’s Nikkei 225 rose 1.4%.
Choe writes for the Associated Press.
