US stock markets closed sharply lower Thursday as rising Treasury yields and disappointing retail results dampened investor sentiment across sectors. According to Business Standard, the Dow Jones dropped 703.84 points, or 1.32%, to 52,759.21, marking a pullback for the three major indices after they had ended a three-day losing streak in the previous session. The S&P 500 declined 0.87% to 7,641.16, and the Nasdaq Composite dropped 1% to 26,067.17. The decline came after Wednesday's brief recovery when the S&P 500 broke a three-session skid as longer-dated Treasury yields retreated from multi-year peaks following the Treasury Department's announcement to increase debt buyback operations. As per Business Standard, the yield on the 10-year U.S. Treasury note rose by more than 5 basis points to 4.704%, surpassing the level prior to the Treasury Department's announcement of an expanded repurchase program, while the 30-year yield also increased by over 5 basis points to 5.248%. According to 22V Research chief market strategist Dennis Debusschere, benchmark 10-year Treasury yields are a headwind for stocks as they face upward pressure from "$90 oil and no Fed rate hikes being priced."
Walmart stock tumbled as much as 10% in its biggest intraday decline since May 2022 despite having marginally raised its guidance, as the company's second-quarter results missed estimates with sales at US stores open at least a year, excluding fuel, rising just 2.6%. According to CNBC TV18, the retailer emerged as the heaviest weight on the S&P 500, with investors focusing on how an important underlying measure of revenue growth at its stores slowed again. The company's forecast for profit in the current quarter fell short of analysts' expectations, highlighting continued challenges in the retail sector amid high inflation and consumer spending pressures. As reported by Quartz, the retailer emerged as the heaviest weight on the S&P 500, with investors focusing on how an important underlying measure of revenue growth at its stores slowed again. The company's growth was hindered by just 0.8% rise in the pharmacy business as price caps on certain drugs took effect, adding to the disappointing performance. Target Corp. and Dollar General Corp. shares also fell after the disappointing retail results, with the slowest sales growth in over six years dragging down consumer peers Costco Wholesale Corp. and Kroger Co. Amazon, Home Depot and American Express also fell 2.16%, 2.85% and 2.57% respectively, adding to the broader retail sector decline.
Alibaba shares plunged 5% despite reporting 45% growth rate in revenue, which was fastest in 22 quarters. However, the e-commerce giant's net profit nosedived by 75% as capital expenditure skyrocketed by 75% to RMB67.68 billion. According to Goodreturns, this dramatic increase in capital expenditure weighed heavily on investor sentiment, overshadowing the strong revenue growth. The disappointing earnings from both Walmart and Alibaba contributed significantly to the broader market decline, with the retail sector facing particular pressure amid what has been described as a mixed reporting season for the group.
Brent crude oil gained as much as 3.4% to nearly $95 a barrel, the highest in almost four weeks, after President Donald Trump threatened Iran with "economic warfare" and announced "the most crushing economic operation" against the country. According to CNBC TV18, the West Texas Intermediate (WTI) is above $86 a barrel, with the surge driven by geopolitical tensions and supply disruptions. Brent Crude, the international standard, rose 0.04% to $93.81 per barrel after Trump announced "any country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences." As reported by CNBC TV18, oil smuggling, swap lines, cash transfers, exchange houses, ship registries, and front companies — It all needs to stop NOW." Benchmark 10-year Treasury yields, which have been "highly correlated" with oil prices, are a headwind for stocks as they face upward pressure from the elevated crude prices. As reported by 22V Research chief market strategist Dennis Debusschere, "It's just a housekeeping move destined to be short-term, at best" when traders initially cheered Wednesday's Treasury Department announcement, as it doesn't address the overarching reasons for yield rises. Miller Tabak + Co. chief market strategist Matt Maley noted that "when those comments were not enough to offset the further rally in crude oil, investors started to hit the sell button."
Markets are now looking toward Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole Economic Policy Symposium next week for clues on the path of interest rates. According to Business Standard, Treasury Secretary Scott Bessent stated in an interview on Thursday that the scale of the repurchase program "could exceed" the announced $4 billion. However, as Muriel Siebert & Co. chief investment officer Mark Malek explained, "It almost seemed like investors were hoping that Treasury Bessent's midday comments would help restore the decline in yields that took place yesterday," but the enthusiasm didn't last long. Cryptocurrency-linked stocks climbed after Bitcoin's rally unleashed the biggest wave of short liquidations in records going back to 2021, with Trump meeting with crypto executives on Thursday adding to the sector's momentum. Stocks that climbed on Thursday include Micron Technology, Marvell Technology, Western Digital Corp, PayPal Holdings Inc, SanDisk Corporation, Coca-Cola Co, Yum! Brands Inc, The Walt Disney Company and McDonald's Corp, among others, providing some relief amid the broader market decline. Oil prices continued to soar, keeping outlook on inflationary trend cautious, with equities also slipping in Europe as well. With this slide, the DOW has eased to three week low. On Friday, Rajesh Palviya, Head of Research at Axis Securities, said "Global cues have turned cautious, with the Dow falling 1.32%, the S&P 500 declining 0.87% and the Nasdaq losing 1%. Asian markets have opened weaker, with Japan's Nikkei down around 1.4%."
Agriculture and fertilizer stocks rose after tractor and equipment maker Deere & Co. raised the lower end of its full-year profit forecast, while Crowdstrike Holdings Inc. shares fell 5.6% after Axios reported that its chief technology officer is leaving to launch and AI-cyber fund. According to CNBC TV18, Advanced Auto Parts Inc. shares slumped as much as 28% after reporting second-quarter sales that missed estimates, with the stock's biggest decline since May 2023. Moderna Inc. shares fell 24% after gaining 177% on Wednesday on positive news about its melanoma vaccine, while real estate stocks were also outperforming. The mixed sector performance reflects the broader market uncertainty driven by geopolitical tensions, rising oil prices, and ongoing concerns about consumer spending amid high inflation pressures. Other stocks that dragged Dow Jones include Boeing (-3.20%), Home Depot (-2.85%), American Express (-2.57%), John & Johnson (-2.21%), Amazon (-2.16%), Merck (-2.11%) and Nike (-2.05%). Tech and chip-related stocks were broadly in red with SpaceX down by 4% and Tesla lower by 2%, adding to the sector's decline. US-listed semiconductor stocks edged lower in premarket trading today ahead of Nvidia and Marvell Technology earnings Wednesday and Thursday, respectively, with the results coming after Bloomberg News reported that Nvidia will hike prices for Vera Rubin and Blackwell chips by more than 15%.
