FX.co ★ Dow Likely To See Further Downside Amid Steep Drop By Salesforce

The major U.S. stock index futures indicate a lower open on Thursday, with Dow futures showing a significant decline. This downturn is mainly driven by a sharp fall in Salesforce (CRM) shares, plummeting 16.5 percent in pre-market trading due to underwhelming fiscal first-quarter revenues and disappointing second-quarter guidance.

Investor concerns about future interest rates continue to impact the markets. However, a slight decrease in treasury yields might help somewhat alleviate the selling pressure. The futures managed to recover some ground after separate reports revealed an increase in weekly jobless claims and a slower-than-expected GDP growth in the first quarter.

The Labor Department reported that initial jobless claims rose to 219,000 in the week ending May 25th, a marginal increase from the previous week's revised level of 216,000. Economists had projected the claims to rise slightly to 218,000 from the initially reported 215,000.

Additionally, the Commerce Department announced that the gross domestic product (GDP) grew by 1.3 percent in the first quarter, a revision down from the previously reported 1.6 percent. This aligns with economists' expectations and contrasts with the 3.4 percent surge in GDP observed in the fourth quarter of 2023.

Following a mixed performance on Tuesday, major U.S. stock indexes all trended downward during Wednesday's trading. The Dow reached its lowest closing level in almost a month, dropping 411.32 points or 1.1 percent to 38,441.54. The S&P 500 fell 39.09 points or 0.7 percent to 5,266.95, and the Nasdaq declined 99.30 points or 0.6 percent to 16,920.58.

Wall Street's weakness was exacerbated by a continuous rise in treasury yields, with the benchmark ten-year note yield climbing to its highest level in nearly a month. The ten-year yield surged above 4.5 percent on Tuesday, as the auctions of two-year and five-year notes witnessed significantly below-average demand.

The ongoing increase in treasury yields heightens concerns about the outlook for interest rates, particularly ahead of critical inflation data expected later in the week. On Friday, the Commerce Department will release its report on personal income and spending for April, which includes the Federal Reserve's preferred inflation measures.

These inflation figures could heavily influence the interest rate outlook ahead of the Federal Reserve's next monetary policy meeting scheduled for June 11-12. Minneapolis Fed President Neel Kashkari, in a CNBC interview on Tuesday, stated that he needs to see "many more months of positive inflation data" before considering an interest rate cut. Although Kashkari does not have a vote on the Federal Open Market Committee this year, he mentioned that he could not rule out raising interest rates if inflation does not show signs of slowing.

The recent strength in the tech sector, which had propelled the Nasdaq to a new record high on Tuesday owing to a surge in Nvidia (NVDA) shares, also saw some unwinding. Moreover, a decline in crude oil prices significantly impacted energy stocks, with the NYSE ARCA Oil Index and the Philadelphia Oil Service Index dropping by 2.2 percent.

Airline stocks also experienced substantial weakness, with the NYSE Arca Airline Index falling by 2.0 percent to a nearly six-month low. American Airlines (AAL) led this decline, plummeting 13.5 percent after revising its second-quarter earnings guidance downward.

Gold stocks, along with steel, semiconductor, and telecom stocks, witnessed a notable decrease amidst a drop in the price of gold.

**Commodity and Currency Markets**

Crude oil futures are down by $0.24, trading at $78.99 a barrel, following a $0.60 drop to $79.23 a barrel on Wednesday. Gold futures, after falling $15.20 to $2,364.10 an ounce in the previous session, are inching up by $1.50 to $2,342.70 an ounce.

In the currency markets, the U.S. dollar is trading at 156.63 yen compared to 157.64 yen at Wednesday’s New York close. Against the euro, the dollar is valued at $1.0827, up from the previous $1.0801.

**Asia**

Asian stocks closed significantly lower on Thursday. The dollar and U.S. bond yields surged on expectations that global interest rates will remain elevated for an extended period. Traders are now eagerly awaiting key inflation readings from the eurozone and the U.S. to gain further insights into the future trajectory of monetary policy.The U.S. core personal consumption expenditures (PCE) price index report is set for release on Friday amid signs of easing price pressures, noted in the recent Consumer Price Index (CPI) survey.

The Japanese yen attempted a recovery from a four-week low, coinciding with Japanese 10-year treasury yields soaring to 13-year highs.

Gold and oil prices dipped slightly in Asian trading after Israel's national security adviser, Tzachi Hanegbi, suggested that a swift resolution to the ongoing conflict is unlikely.

China's Shanghai Composite Index fell 0.6% to 3,091.68 as the International Monetary Fund upgraded the nation's GDP growth forecasts for 2024 and 2025 but cautioned about future risks.

Hong Kong’s Hang Seng Index dropped 1.3% to 18,230.19 ahead of China's official Purchasing Managers Index data release for May.

Japanese markets took a sharp downturn as domestic government bond yields reached new multi-year highs, driven by expectations of another rate hike by the Bank of Japan. The Nikkei 225 Index declined 1.3% to 38,054.13, extending its losses for a third consecutive session, hitting a one-month low. The broader Topix Index fell 0.6%, closing at 2,726.20.

Top technology stocks faced significant selling pressure, with Advantest plunging 6.1%. Tokyo Electron, SoftBank Group, and Uniqlo parent company Fast Retailing all saw drops exceeding 2%.

Seoul stocks retreated in anticipation of industrial production figures due on Friday, with the Kospi closing 1.6% lower at 2,635.44, impacted by weakness in technology stocks. Market leader Samsung Electronics fell 2.3%, and SK Hynix, the second-largest chipmaker, tumbled 3.4%.

Australian markets posted losses for the third straight session after April inflation data stoked speculation about another interest rate hike by the Reserve Bank. The benchmark S&P/ASX 200 Index decreased by 0.5% to 7,628.20, while the broader All Ordinaries Index also fell by 0.5%, settling at 7,895.90.

In New Zealand, the S&P/NZX 50 Index slumped 1.0% to 11,557.21 amid growing concerns that the Federal Reserve is unlikely to cut rates soon.

### Europe

European stocks registered modest gains on Thursday, after two consecutive days of declines driven by inflation and interest rate concerns.

Unemployment in the eurozone reached a new record low in April, while economic sentiment showed slight improvement in May. Eurostat data revealed the seasonally adjusted unemployment rate in the euro area decreased from 6.5% to 6.4% in April, beating expectations. Additionally, the economic sentiment indicator increased from 95.6 to 96.0 in May, aligning with forecasts.

The U.K.'s FTSE 100 Index rose by 0.4%, while the French CAC 40 Index and the German DAX Index posted gains of 0.3% and 0.1%, respectively.

In Italy, Banco BPM surged after CEO Giuseppe Castagna asserted that current conditions do not support merging with rival lender Monte dei Paschi. Auto Trader Group saw a significant uptick following better-than-expected full-year results. De La Rue's shares jumped as the banknote maker confirmed ongoing discussions with multiple parties interested in its divisions.

VINCI shares rose in Paris after the French concessions and construction company announced a new contract at Melbourne Airport in Australia worth approximately €96 million (A$159 million).

Bayer shares moved higher after announcing that its clinical-stage cell therapy unit BlueRock Therapeutics LP received the U.S. FDA's Regenerative Medicine Advanced Therapy designation for its investigational cell therapy bemdaneprocel for Parkinson's disease.

Conversely, Telecom Italia's shares slumped despite reporting increased first-quarter revenue and maintaining its full-year guidance. Science and technology giant Merck KGaA also saw a decline following a non-binding MOU with the Korea Advanced Institute of Science and Technology to advance scientific collaboration in life sciences.

### U.S. Economic Reports

First-time claims for U.S. unemployment benefits modestly increased for the week ending May 25, according to the Labor Department's report on Thursday. Initial jobless claims rose to 219,000, up by 3,000 from the prior week's revised figure of 216,000. Economists had forecasted claims to inch up to 218,000 from the previously reported 215,000. The less volatile four-week moving average edged up to 222,500, an increase of 2,500 from the previous week's revised average of 220,000.Revised data unveiled by the Commerce Department on Thursday indicated that U.S. economic growth for the first quarter of 2024 decelerated more significantly than previously anticipated.

According to the Commerce Department, the gross domestic product (GDP) rose by 1.3 percent in the first quarter, compared to the earlier estimate of a 1.6 percent increase. This revised figure aligns with economists' expectations and contrasts with the 3.4 percent GDP surge recorded in the fourth quarter of 2023.

The downward revision in growth stemmed from reductions in consumer spending, private inventory investment, and federal government spending.

At 10 a.m. ET, the National Association of Realtors will publish its April report on pending home sales, expected to reflect a 0.6 percent decrease following a 3.4 percent rise in March.

The Energy Information Administration will release its weekly oil inventory report for the period ending May 24th at 11 a.m. ET. Projections indicate a decrease of 1.9 million barrels in crude oil inventories, contrasting with a 1.8 million barrel increase in the previous week.

At 12:05 p.m. ET, New York Federal Reserve President John Williams is slated to speak at a hybrid Signature Luncheon event hosted by the Economic Club of New York. Later, at 5 p.m. ET, Dallas Federal Reserve Bank President Lorie Logan will address the Borderplex Alliance Distinguished Speaker Series.

### Stocks in Focus

Kohl's (KSS) shares have taken a hit in pre-market trading, following the department store chain's announcement of an unexpected fiscal first-quarter loss, accompanied by weaker-than-anticipated revenues.

UiPath (PATH) is also experiencing a pre-market downturn despite surpassing fiscal first-quarter estimates; however, the company's guidance disappointed investors. Additionally, the resignation of CEO Rob Enslin was announced.

Conversely, Foot Locker (FL) shares may show initial upward momentum after the apparel and footwear retailer reported better-than-expected fiscal first-quarter results.

Okta (OKTA), an identity and access management company, might also see gains after Evercore ISI upgraded its stock rating to "Outperform" from "In-Line."