U.S. Stocks Fall as Disappointing Salesforce Forecast Hits Tech Sector

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U.S. stocks closed lower on Thursday, driven by a sharp decline in technology shares following a dismal forecast from Salesforce. The Nasdaq fell over 1%, leading the downturn, as investors also digested mixed economic data that showed slower-than-expected growth in the first quarter and a rise in weekly jobless claims.

Salesforce shares plummeted by 19.7% after the company projected second-quarter profit and revenue below Wall Street estimates due to weak client spending on its cloud and enterprise business products. This significant drop in Salesforce’s stock weighed heavily on the technology sector, causing the S&P 500 technology index to fall by 2.5%, making it the biggest drag on the benchmark index. The communication services sector also fell by 1.1%, while all other S&P 500 sectors ended higher.

Adding to the market’s woes, the Commerce Department reported that the economy grew at a slower pace in the first quarter than previously estimated. Downward revisions to consumer and equipment spending, along with a key measure of inflation ticking lower, contributed to this slower growth. This report comes ahead of the anticipated personal consumption expenditure report for April, set to be released on Friday.

Mark Hackett, Chief of Investment Research at Nationwide, commented on the market’s reaction: “Normally you’d expect the market to rally off of a downward revision to GDP because it signals the economy is moderating, the Fed’s job is done, we can get rate cuts. That’s not the reaction we’re getting today. So I’m a little surprised but not that surprised simply because after the six-week rally that we’ve had, it’s pretty healthy and expected to see some consolidation or sideways move for a while.”

The S&P 500 lost 31.47 points, or 0.60%, closing at 5,235.48. The Nasdaq Composite fell by 183.50 points, or 1.08%, to 16,737.08, and the Dow Jones Industrial Average dropped by 330.06 points, or 0.86%, ending at 38,111.48.

U.S. Treasury yields dipped following the day’s data, while the probability of at least a 25-basis-point interest rate cut in September rose slightly to 50.4% from 48.7% before the data release, according to the CME Group’s FedWatch Tool. Earlier in the week, bond yields had reached multi-week highs.

In after-hours trading, Dell Technologies shares fell more than 12% following its quarterly results, having already declined by 5.2% during regular trading. Conversely, HP shares jumped 17% after reporting better-than-expected second-quarter revenue. Tesla rose by 1.5% following reports by Reuters that the company was preparing to register its ‘Full Self-Driving’ software in China.

Among retailers, Best Buy shares surged 13.4% after exceeding profit forecasts for the quarter, while department-store chain Kohl’s saw its shares plummet by 22.9% after cutting its annual sales and profit forecasts.

Overall, advancing issues outnumbered decliners by a 2.57-to-1 ratio on the NYSE and by a 1.41-to-1 ratio on the Nasdaq. The S&P 500 recorded 14 new 52-week highs and 10 new lows, while the Nasdaq Composite saw 51 new highs and 95 new lows. Volume on U.S. exchanges totaled 12.10 billion shares, slightly below the 12.39 billion average for the last 20 trading days.