NASDAQ 100, Dow Jones, S&P 500: Investors Weigh Debt Talks, Fed Decision; Alibaba Misses Revenue Estimate

Highlights

• S&P 500 falls as traders consider debt talks, Fed decision, and earnings
• Initial jobless claims decrease, labor market retains tightness

• Alibaba misses revenue estimate, approves cloud unit spinoff

Overview

On Thursday, the Dow Jones Industrial Average is trading lower on the opening as traders on Wall Street considered various factors such as debt ceiling negotiations, the Federal Reserve’s upcoming interest rate decision, and the latest corporate earnings. The Dow traded 96 points lower, equivalent to a 0.3% decrease. Similarly, the S&P 500 saw a slight dip of 0.1%, while the Nasdaq Composite registered a 0.2% increase.

Economic Resilience Persists, Rate Hikes Unaffected

While the latest economic data suggested a resilient economy, sentiment remained cautious. Dallas Fed President Lorie Logan emphasized that the data did not present a case for pausing rate hikes during the Federal Reserve’s next rate policy decision on June 14. Logan acknowledged the progress made in gradually increasing the target range for the federal funds rate over the past ten Federal Open Market Committee (FOMC) meetings.

Optimism Mounts: US Debt Default Averted

House Speaker Kevin McCarthy expressed confidence on Wednesday that the United States would not default on its debt. President Joe Biden echoed this sentiment, stating that he was optimistic lawmakers would come together to reach a deal and prevent a default. To facilitate negotiations, the president decided to cut short his trip to Asia and return on Sunday, instilling hope among traders that a deal could be reached by then.

Jobless Claims Drop, Manufacturing Improves

Unexpectedly, initial jobless claims decreased last week, indicating that the labor market retains some tightness. According to the Labor Department, first-time filings for the week ending May 13 totaled 242,000, which is a drop of 22,000 from the previous week and below the Dow Jones estimate of 250,000. Continuing claims also slightly decreased to 1.799 million, compared to the FactSet estimate of 1.829 million.

In other economic news, the Philadelphia Federal Reserve reported an improvement in the region’s manufacturing sector. The manufacturing index for the area experienced a rise to -10.4. This shows an increase of 29 percentage points, surpassing the estimate of -20. However, despite the improvement, the index still indicates a decline in the sector. It measures the percentage of companies reporting expansion against those experiencing contraction in the region.

Cisco Shares Dip, Walmart Soars

Cisco, a technology company, observed a 2.8% decrease in its shares following a decline in orders for the quarter.

Conversely, retail giant Walmart saw a positive impact on the market, with its shares rising by 2.2% due to a strong financial report. Walmart exceeded Wall Street’s expectations in terms of both earnings per share. And revenue for the first quarter, consequently raising its projections for full-year performance.

Alibaba’s Q1 Revenue Misses Expectations

Alibaba Group Holding Ltd, the Chinese e-commerce giant, posted a 2% rise in quarterly revenue, below expectations, as it grapples with challenges in attracting new users in a maturing e-commerce sector and increased competition. In response to the challenges, the company made a strategic decision. They approved a full spinoff of its Cloud Intelligence Group. The intention is to list it as a separate entity within the next year. This move aims to enhance the company’s presence in the cloud computing industry.

Bath and Body Works’ Surges on Raised Guidance

Bath and Body Works‘ stock surged over 10% in premarket trading after the company raised its guidance for the full fiscal year. The retailer experienced year-over-year declines in sales and profit. However, they credited the raised guidance to better-than-expected earnings per share. Additionally, the early payoff of debt in the first quarter contributed to the positive outlook.