On Thursday, Wall Street continued to struggle to gain momentum as a decline in Walgreens Boots Alliance (WBA) and Micron technology (MU) capped gains. Meanwhile, U.S. Treasuries rallied after a slew of economic data supported a scenario in which the The Federal Reserve may start cutting interest rates.
The benchmark S&P 500 Index (SP500) was steady at 5,478.21 points in afternoon trading, while the tech-heavy Nasdaq Composite (COMP: IND) was higher by 0.22% to 17,844.83 points. The blue-chip Dow (DJI) had rose 0.23% to 39,219.52 points.
Of the 11 S&P sectors, six were in the red.
Walgreens (WBA) slumped after CEO Tim Wentworth said pharmacies' quarterly margins had eroded in a tough operating environment. Additionally, the CEO said the company would close a “substantial number” of underperforming pharmacies. Walgreens (WBA) lost its place among the 30 members of the Dow Jones in February.
Micron technology (MU) pulled back, after the memory chip maker issued guidance that was in line with estimates. For a company that is projected to make billions from its ai memory chips, the slightly conservative guidance disappointed some of the extremely high expectations investors had coming into the quarterly report.
Attention now turns to Nike (NKE), with the world's largest shoe maker scheduled to announce its numbers after the closing bell.
Thursday also saw an extremely busy economic calendar. Before the start of regular trade, the US Census Bureau said new orders for manufactured durable goods unexpectedly rose 0.1% monthly in May. Still, the rate of increase has slowed for four consecutive months.
“To that end, while overall orders revealed some upside surprise, the report was consistent with a fairly weak demand environment as capital spending conditions remain constrained by elevated costs and overall uncertainty… Capital spending conditions are unfavorable, and even if the “If the Federal Reserve is able to lower rates later this year, it is unlikely that we will see a respite in terms of borrowing costs until next year,” said Shannon Seery Grein from Wells Fargo.
At the same time, the US Bureau of Economic Analysis released its final estimate for US gross domestic product (GDP) growth in the first quarter, revising it upward to +1.4% from the +1.3%. GDP growth remains significantly lower than the 3.4% increase in the fourth quarter of 2023.
The update to durable goods orders and especially the final GDP estimate pointed to signs that the Federal Reserve's aggressive tightening of monetary policy was having the desired effect of slowing the economy.
But in perhaps the most notable data report of the day, the number of Americans who filed for insured unemployment benefits last week rose to 1.839 million, the highest level since November 2021.
Insured unemployment, also known as continuing claims, is the number of people who already applied for an initial unemployment benefit and then filed another claim to continue receiving benefits for another week.
“Continuing claims of 1,839,000 surprised more significantly to the upside for the week ending June 15 (1,828,000 cons), but were just above my estimate of 1,835,000,” said Parker Ross, economist global head of Arch Capital Group, on x (formerly twitter).
“Although both measures of unemployment have been deteriorating since the beginning of the year, continued claims still reflect a more substantial weakening of the labor market,” Ross added.
The resilience of the labor market, along with high inflation, has been one of the main reasons why the Federal Reserve has not been able to ease monetary policy yet.
Also shortly after the opening bell, another indicator showed the cooling effect that tighter monetary policy had had on the housing market. The National Association of Realtors said pending home sales fell 2.1% on a monthly basis in May to a record low.
In response to the weak economic calendar, US Treasury yields fell as traders bought bonds. There was also a $44 billion 7-year note auction that was negotiated. Longer-term 30-year (US30Y) and 10-year (US10Y) yields fell 5 basis points each to 4.42% and 4.29%, respectively. The 2-year yield (US2Y), short-term and more sensitive to rates, fell 4 basis points to 4.72%.
See live data on how Treasury yields are performing across the curve on the Seeking Alpha bond page.
