The stock market fell on Thursday after a colder-than-expected inflation report underscored the need for continued aggressive Fed tightening. Selling power (CRM) plunged more than 10% after announcing a management reshuffle.
The Nasdaq composite fell 0.3% while the S&P 500 lost 0.2%. The Dow Jones Industrial Average fell 0.9%. The small cap Russell 2000 Index remained stable.
Volume increased on the NYSE and Nasdaq from the same time on Wednesday.
The yield on the benchmark 10-year Treasury fell 4 basis points to 3.56%. Crude oil prices rose 1.9% to $82.06 a barrel.
Stock Market Gets a Brief Rise in Colder Inflation
The Commerce Department’s PCE price index, the Fed’s preferred measure of inflation, rose 0.3% in October. That was fresher than estimates, marking a 6% year-over-year increase from June’s 40-year high of 7%.
The index tracks changes in the prices of goods and services purchased by consumers throughout the economy.
“Consumer spending held up in October, but the outlook for holiday spending is risky with the savings rate nearing a record high,” said Bill Adams, chief economist at Comerica Bank.
Meanwhile, first-time jobless claims from the Labor Department fell to 225,000 from 240,000 the previous week. They were expected to drop an inch to 238,000.
Personal spending jumped 0.8% while personal income jumped 0.7% in October. Revenue beat Econoday’s consensus estimate of 0.4%. Both are good news for the holiday shopping season.
“Service prices are more sticky and a likely annoyance for central bankers,” said Jeffrey Roach, chief economist for LPL Financial. “However, annual rent inflation is starting to ease across the country, rising just 0.4% in October, the smallest monthly increase since February.”
Powell’s comments mark a shift in Fed policy
On Wednesday, Fed Chairman Jerome Powell said the pace of rate hikes may start to slow at the December meeting, providing more explicit support for a lower increase.
The probability of the Fed raising rates by 0.5% in December is pegged at 79.4%, while the odds of a 75 basis point hike are 20.6%, according to the CME tool FedWatch.
In other action, Asian stock markets soared after reports that Chinese government officials were set to announce a relaxation of their strict Covid quarantine restrictions. The Hang Seng index gained 0.8%, the Shanghai index 0.5% and the Nikkei 225 0.9%.
In Europe, the FTSE 100 rose 0.2%, the German DAX 0.7% and the French CAC 40 0.2%.
Salesforce disrupts the software industry
Dow Jones component Salesforce reported quarterly results ended in October that beat estimates, but said co-chief executive Bret Taylor would leave amid leadership changes. Marc Benioff will remain the sole CEO.
“The Street will view this as a clash with Taylor one of the pillars of the CRM strategy, although Benioff remains the heart and lungs of the Salesforce story,” Wedbush analyst Daniel Ives said in a statement.
Salesforce fell almost 10% on the news. CRM stock is down about 39% in 2022 as software growth stocks struggle. The CRM is on course for its biggest percentage drop since December 1, 2021, when it fell 11.74%.
Revenues are slightly above Wall Street targets.
The retail and financial sectors were the hardest hit by the declines. The S&P Retail ETF fell more than 1% on weak earnings at discount retailers.
Stock market movers and shakers
Costco (COST) fell more than 6% after the retailer said its November sales rose 5.7% to $19.17 billion, after rising 7.7% in October. Costco also reported a double-digit drop in e-commerce sales, ahead of its earnings report due out next week.
Costco builds a cup base with a purchase point of 564.85. As of now, there is no sell signal, but investors should watch this stock and next week’s earnings report.
General dollar (DG) fell more than 8% after missing fiscal third quarter estimates. Meanwhile, the rival discount chain five below (FIVE) jumped more than 12% after earnings nearly doubled Wall Street estimates.
Large lots (BIG) also fell more than 12% on Thursday after narrowly missing Wall Street earnings estimates.
Okta (OKTA) climbed nearly 25% on Thursday on second-quarter results that beat estimates. The cybersecurity software company announced an adjusted loss of 10 cents per share on revenue of $452 million. Analysts had expected Okta to post a loss of 31 cents per share on revenue of $430.7 million. The jump would be the largest percentage increase on record.
Pure storage (PSTG) released its third-quarter results on Wednesday, beating estimates on both upper and lower results. PSTG shares rose 2.4%.
The company reported adjusted earnings of 31 cents per share on revenue of $676 million. Analysts had expected 25 cents on $672 million.
Tesla Stock Plunges As It Prepares To Unveil Semi
Splunk (SPLK) beat earnings and sales estimates by wide margins on Wednesday night. Shares jumped more than 10%.
The database analytics software company reported adjusted earnings of 83 cents per share on revenue of $930 million. Analysts expected Splunk to earn 25 cents on $847 million.
For the year, Splunk forecasts revenue between $1.055 billion and $1.085 billion. The midpoint of $1.07 billion is slightly above estimates.
Thursday, You’re here (TSLA) is set to unveil its long-awaited Semi, an eighteen-wheel long-haul electric cargo hauler. It was first announced five years ago. Tesla stock slid 0.3% on Thursday.
The Innovator IBD 50 (FFTY) ETF fell 0.8%, weighed down by Shoals Technical Group (SHLS), but helped by other holdings like Celsius (CEHL).
Shoals is down more than 16% after the company announced the launch of an underwritten public offering of 20,000,000 shares of Class A common stock in the company.
Follow Michael Molinski on Twitter @IMmolinski
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