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Why the Dow has fallen 1,000 points in the last three days
US markets have had a rough week. The Dow Jones is down about 1,000 points in just the last three days — and the negative momentum hasn’t abated on Thursday.
The Dow closed 331 points lower, or 0.9%. The S&P 500 fell 0.6% and the Nasdaq Composite fell 1.1% due to weak results from Salesforce (CRM) worried investors.
Actions of customer relationship management company fell 19.7% after reporting a loss in revenue and lowering expectations for next year, recording its worst day in two decades.
This comes after a poor Wednesday for the broader market, with all 11 S&P 500 sectors closing lower. The Dow fell more than 300 points, driven largely by a drop in shares of giant chipmaker Nvidia (NVDA), pulling down big tech stocks.
This week’s recession was fueled by a number of factors, including profits and stronger than expected economic data. Bonds took a particular hit as inflation concerns rose and following a weak Treasury auction on Wednesday. The 10-year Treasury yield rose to its highest level since late April.
Robust economic data has also spooked investors, who fear that signs of a stronger economy could prompt the Federal Reserve to keep interest rates higher for longer as it struggles to reduce inflation.
The S&P 500 has finished higher for 23 of the last 30 weeks, marking a joint record since 1989, but is now headed for a negative week.
“There has already been a relentless streak of gains in recent weeks that were always going to be difficult to maintain,” Deutsche Bank analysts wrote on Thursday. “It’s clear the momentum is now more negative.”
New economic data released on Thursday showed that US gross domestic product in the first quarter was revised downwards (1.3% from 1.6%) and that personal consumption is slowing. This is a sign that economic expansion is slowing down – which some analysts consider a double-edged sword.
The data “may be a concern for companies and stock market investors, but on the other hand, the slowdown in consumption and economic growth may be just the news we need to see so that the inflation rate continues to fall and allow the Fed to cut interest rates after all,” wrote Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, on Thursday.
Meanwhile, all eyes are on the release of the April Personal Consumption Expenditures Index on Friday – the Fed’s preferred inflation gauge.
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