The Dow Is Dropping, Netflix Is Sinking — and What Else Is Happening in the Stock Market Today
Wall Street will be closely watching inflation data.
Ed Jones/AFP via Getty Images
The stock market is dropping Friday after the latest consumer price index showed that inflation is still a major problem. Bets that the Federal Reserve will remain aggressive in lifting interest rates are back on.
Dow Jones Industrial Average futures fell 365 points, or 1.1%. S&P 500 futures fell 1.4%, while Nasdaq Composite futures lost 1.8%. The indexes were around flat until the inflation data came out.
The consumer price index rose 8.6% annually in May, the Labor Department reported Friday, higher than the expected 8.3% increase and April’s result of 8.3%.
Markets had been hoping to see inflation decline. A fast decline would have meant that the Fed would be more likely to slow down the pace of interest rate hikes. Markets had recently experienced a few days of hope that the Fed could soon slow down on lifting rates.
That narrative seems dead for the moment.
“So much for the idea that inflation has peaked,” wrote Greg McBride, chief financial analyst at Bankrate. “Any hopes that the Fed can ease up on the pace of rate hikes after the June and July meetings now seems to be a long shot.”
The bond market agrees . The 2-year Treasury yield, which attempts to forecast the level of the federal funds rate a couple of years from the present, popped to as high as 2.92% from 2.85% minutes before the inflation result hit the wires. It’s now at 2.9%, still a multiyear high.
That’s making the stock market nervous. Higher rates are meant to cool economic demand, which means analysts could soon revise earnings estimates downward.
Now, the market seems to be in a bad way.
Friday’s declines come even after the indexes sold off Thursday afternoon, with the Nasdaq and S&P 500 dropping more than 2% each for the day.
That wave of selling sent the S&P 500 below a key level Thursday, which seems to have opened the door to more losses. The index had attracted buyers at around the 4070 level for about 10 trading days prior to Thursday’s selloff. When the index fell below that level, a little panic set in. With continued selling Friday, the index is now below 4000.
Here are some stocks on the move Friday:
DocuSign (ticker: DOCU) stock dropped 25% after the company lowered its quarterly outlook. Management expects the key billings metric to come in at $2.531 billion at the midpoint of the range for fiscal year 2023. That’s down from previous guidance of just above $2.7 billion. The company also said that turnover in its sales force is prompting the company to spend energy on recruiting.
Advanced Micro Devices (AMD) fell 0.7%. That’s even after analysts at KeyBanc said the company’s Investor Day forecast that it could boost revenue 20% annually was plausible, and that the stock justifies a higher valuation than its peers.
Credit Suisse (CS) fell 1.8%, after denying that State Street (STT) would be taking over the Swiss bank. State Street, which also denied the market rumor, saw its stock dip less than 1% in the premarket.
Tesla (TSLA) fell 0.9%, even as analysts at Barclays said that deliveries of electric vehicles are likely to fall below expectations in the second quarter due to the closure of Tesla ’s factory in China because of Covid-19 restrictions.
Netflix
(NFLX) stock dropped 5.3% after getting downgraded to Sell from Neutral at Goldman Sachs.
Write to Jacob Sonenshine at [email protected] and Jack Denton at [email protected]
