Sector Movements
Today saw profit-taking in Nvidia, which has surged 145% year-to-date. Nvidia and other AI-related stocks have significantly contributed to Wall Street’s rally this year, with Nvidia alone accounting for about a third of the S&P 500’s over 12% year-to-date gains. The technology sector led declines with a 0.5% dip, while the chip stocks index lost 0.8%. However, five out of eleven S&P 500 sectors posted gains, led by a 0.6% rise in consumer staples.
Notable Stock Changes
Notably, Salesforce rose 2.5%, helping the Dow outperform. Lululemon Athletica saw a 5% rise after exceeding first-quarter profit and revenue expectations. Conversely, U.S.-listed shares of NIO dropped 6.5% following a quarterly net loss report, and Five Below fell 12.9% after lowering its annual net-sales forecast.
Focus on Payrolls
Investors are now focused on the nonfarm payrolls report due on Friday, which is expected to provide insights into the labor market’s strength and guide Federal Reserve policy. On Thursday, the Labor Department reported an increase in jobless claims to a seasonally adjusted 229,000 for the week ended June 1. This indicates easing labor market tightness, potentially giving the Fed more room to cut rates.
Rate Cut Prospects
According to the CME’s FedWatch tool, traders see a 68% chance of a rate reduction in September and have priced in about two cuts this year. Reuters’ poll also supports this outlook. With both the European Central Bank and Bank of Canada beginning easing cycles, there’s growing pressure on the Fed. Divergences among major economies could increase pressure on the U.S. economy, making a September rate cut more likely.
Market Internals
Declining issues outnumbered advancers on both the NYSE and Nasdaq, with ratios of 1.06-to-1 and 1.50-to-1, respectively. The S&P index recorded 20 new 52-week highs and five new lows, while the Nasdaq recorded 51 new highs and 68 new lows.
Market Forecast
With Nvidia’s decline weighing on tech stocks and mixed signals from the labor market, the market may face continued volatility. However, the expected nonfarm payrolls report and potential Fed rate cuts could provide support, indicating a cautiously bullish outlook in the short term.
