The stock market dipped lower Thursday after a cooler-than-expected inflation report pointed to a need for continued aggressive Fed tightening. Salesforce plunged more than 10% after announcing a leadership shake-up.
The Nasdaq composite fell 0.3% while the S&P 500 lost 0.2%. The Dow Jones Industrial Average dropped 0.9%. The small-cap Russell 2000 index was flat.
Volume rose on the NYSE and the Nasdaq vs. the same time on Wednesday.
The yield on the benchmark 10-year Treasury note dropped 4 basis points to 3.56%. Crude oil prices rose 1.9% to $82.06 per barrel.
Stock Market Gets Brief Lift From Cooler Inflation
The Commerce Department's PCE Price Index, the Fed's preferred measure of inflation, rose 0.3% in October. This was cooler than estimates, marking a 6% year-over-year increase compared to June's 40-year high of 7%.
The index tracks the change in prices of goods and services purchased by consumers throughout the economy.
"Consumer spending held up in October, but the outlook for holiday spending is dicey with the saving rate near a record low," said Bill Adams, chief economist for Comerica Bank.
Meanwhile, first-time jobless claims from the Labor Department fell to 225,000 vs. 240,000 in the previous week. They were expected to inch lower to 238,000.
Personal spending jumped 0.8% while personal income leapt 0.7% in October. Income exceeded the Econoday consensus estimate of 0.4%. Both are good news for the holiday shopping season.
"Services prices are more sticky and a likely annoyance for central bankers," said Jeffrey Roach, chief economist for LPL Financial. "However, annual rent inflation is starting to ease across the country, rising only 0.4% in October, the smallest monthly increase since February."
Powell's Comments Mark Shift In Fed Policy
On Wednesday, Fed Chair Jerome Powell said the pace of rate hikes could start to slow at the December meeting, providing more-explicit support for a smaller increase.
The probability the Fed will raise rates by 0.5% in December is pegged at 79.4%, while odds for a 75-basis-point hike are 20.6%, according to the CME FedWatch tool.
In other action, Asian stock markets shot up after reports that Chinese government officials were set to announce a relaxing of their strict Covid quarantine restrictions. The Hang Seng Index gained 0.8%, the Shanghai index 0.5% and the Nikkei 225 0.9%.
In Europe, the FTSE 100 rose 0.2%, the German DAX 0.7% and the French CAC 40 0.2%.
Salesforce Rocks Software Industry
Dow Jones component Salesforce reported October-ended quarter earnings that topped estimates but announced that co-Chief Executive Bret Taylor will depart amid management changes. Marc Benioff will remain as the sole CEO.
"The Street will view this as a shocker with Taylor one of the mainstays in the CRM strategy although Benioff remains the core hearts and lungs of the Salesforce story," said Wedbush analyst Daniel Ives in a report.
Salesforce fell nearly 10% on the news. CRM stock has retreated about 39% in 2022, as software growth stocks have struggled. CRM is on pace for its largest percentage decrease since Dec. 1, 2021, when it fell 11.74%.
Revenue came in slightly above Wall Street targets.
The retail and financial sectors took the brunt of the declines. The S&P Retail ETF was down more than 1% on mostly weak earnings from discount retailers.
Stock Market Movers And Shakers
Costco slid more than 6% after the retailer said its November sales rose 5.7% to $19.17 billion, following a 7.7% rise in October. Costco also reported a double-digit decline for e-commerce sales, ahead of its earnings report which is due out next week.
Costco is building a cup base with a buy point of 564.85. As of now there is no sell signal but investors should watch keep a look out on this stock and on next week's earnings report.
Dollar General fell more than 8% after missing fiscal Q3 estimates. Meanwhile, rival discount chain Five Below shot up more than 12% after earnings nearly doubled Wall Street estimates.
Big Lots also fell more than 12% Thursday after barely missing Wall Street's earnings estimates.
Okta stock soared almost 25% Thursday on second-quarter results that beat estimates. The cybersecurity software company reported an adjusted loss of 10 cents a share on revenue of $452 million. Analysts expected Okta to report a loss of 31 cents a share on revenue of $430.7 million. The jump would be the largest percentage increase on record.
Pure Storage reported third-quarter results late Wednesday, beating estimates on the top and bottom lines. PSTG stock rose 2.4%.
The company reported adjusted earnings of 31 cents per share on revenue of $676 million. Analysts had expected 25 cents on $672 million.
Tesla Stock Dips As It Prepares To Unveil Semi
Splunk beat earnings and sales estimates by wide margins late Wednesday. Shares jumped more than 10%.
The software database analytics company reported adjusted earnings of 83 cents per share on revenue of $930 million. Analysts expected Splunk to report 25 cents on $847 million.
For the year, Splunk expects revenue between $1.055 billion and $1.085 billion. The midpoint of $1.07 billion is slightly above estimates.
On Thursday, Tesla is expected to unveil its long awaited Semi, an eighteen-wheeler long-haul electric freight hauler truck. It was first announced five years ago. Tesla stock slipped 0.3% Thursday.
The Innovator IBD 50 ETF fell 0.8%, weighed down by Shoals Tech Group, but helped by other holdings such as Celsius.
Shoals is down more than 16% after the company announced the launch of an underwritten public offering of 20,000,000 shares of the Company's class A common stock.
Follow Michael Molinski on Twitter @IMmolinski
