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Markets under pressure due to falling tech
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Key points:
- The Nasdaq fell more than 1%, leading the decline.
- Economic growth in the first quarter of 2024 was below expectations.
- Salesforce shares fell 19.7% as it cut its second-quarter guidance.
American stock indices ended the trading session with a decline. The Nasdaq index posted the biggest decline, down more than 1%, with technology stocks leading the decline.
The S&P 500 lost 31.47 points, or 0.60%, to close at 5,235.48. The Nasdaq Composite fell 183.50 points, or 1.08%, to 16,737.08. The Dow Jones Industrial Average fell 330.06 points, or 0.86%, to 38,111.48.
The market decline is mainly attributed to the disappointing forecast from Salesforce, a cloud software manufacturer.
US Department of Commerce Findings
A US Commerce Department report showed that the country’s economy grew more slowly in the first quarter of 2024 than previously estimated. The downward revision was driven by declines in consumer spending, equipment investment, and the key inflation indicator. A separate report showed weekly jobless claims rose, also beating expectations.
Traditionally, one would expect the market to react higher following a downward revision to GDP, as this could signal a slowing economy, which in turn could lead to the Fed cutting interest rates. However, in this case the market reacted negatively.
Analysts expressed surprise at the market reaction, but noted that after the market’s six-week rally, some period of consolidation or sideways movement is natural. The market is in a healthy state and only a temporary adjustment is possible in the near future.
Salesforce shares pushed the market lower
Salesforce shares fell 19.7% after the company released second-quarter guidance that fell below analysts’ expectations. The forecasts reflected a decline in demand for the company’s cloud and enterprise solutions, driven by weakening customer spending.
Dell Technologies shares fell by more than 12% on the day following the publication of quarterly results. The company’s shares ended the next trading session with a fall of 5.2%.
In contrast, HP shares rose 17% in trading. The personal computer maker reported second-quarter revenue that exceeded expectations. Tesla shares gained 1.5% following news of the company’s plans to register its self-driving software in China.
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