By Stephen Culp
NEW YORK (Reuters) – U.S. stocks turned negative on Thursday on enthusiasm for Nvidia Corp. (NASDAQ:) quarterly results faded and strong economic data fueled concerns about higher monetary policy for longer.
US Treasury yields rose after the data.
All three major U.S. stock indexes gained downward momentum in afternoon trading, with technology stocks enjoying the only gains among the 11 major sectors.
“The market is at all-time highs, valuations are on edge, and we're coming off the high of Nvidia's report Wednesday night,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky.
“You've seen it after the Federal Reserve reports, you've seen it after a handful of really important data releases – and I think it's the same with NVIDIA earnings – you get this initial kind of pop or sell-off associated with reaction, and then the market digests it, it recalibrates to where expectations were,” Mayfield added.
Semiconductor stocks got an adrenaline rush from Nvidia, the large-cap chipmaker at the forefront of ai optimism, when the company forecast quarterly revenue above estimates and announced a stock split.
On the economic front, S&P Global's preliminary PMI survey showed that U.S. business activity has expanded faster than economists forecast in May.
The data is primarily viewed through the lens of the Federal Reserve, the timing of its first interest rate cut and whether the central bank can control inflation without triggering a recession.
“The preliminary PMI was stronger than expected, which put a feather in the cap of the hawks,” Mayfield added. “So the thinking has shifted from Nvidia to thinking about fees and 'higher for longer.'”
It fell 609.91 points, or 1.54%, to 39,061.13, the S&P 500 lost 44.34 points, or 0.84%, to 5,262.67 and fell 96.85 points, or 0.58%, to 16,704.70.
European stocks pared earlier gains to close only nominally higher, as optimism over Nvidia's strong outlook was tempered by lower expectations of rate cuts.
The pan-European index rose 0.07% and the MSCI index of global stocks lost 0.65%.
Emerging market stocks lost 0.44%. MSCI's broadest index of Asia-Pacific shares outside Japan closed down 0.4%, while rising 1.26%.
US Treasury yields rose after data suggested US business activity has recovered and the labor market remains tight, supporting the Federal Reserve's “higher for longer” narrative.
Benchmark 10-year bonds last fell 11/32 in price to yield 4.4767%, from 4.434% on Wednesday.
The 30-year bond last fell 17/32 in price to yield 4.5816%, from 4.55% on Wednesday.
The dollar gained ground against a basket of global currencies after a series of economic data from the United States and the euro zone.
The euro rose 0.14% and the euro fell 0.16% to $1.0804.
The Japanese yen weakened 0.06% against the dollar to 156.89 per dollar, while the British pound last traded at $1.2689, down 0.20% on the day.
Crude oil prices reversed earlier gains to record their fourth consecutive session, as the notion that interest rates will remain restrictive for longer than expected raised the possibility of weakening US demand.
fell 0.90% to settle at $76.87 per barrel, while it closed at $81.36 per barrel, down 0.66% on the day.
Gold prices fell to a one-week low following the release of the Federal Reserve minutes.
fell 1.8% to $2,335.19 an ounce.
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