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Stock Market News for May 30, 2024

Zacks Equity Research
·4-min read

U.S. stock markets closed sharply lower on Wednesday following spikes on yields of U.S. government bonds. Moreover, market participants remained highly concerned regarding the time and magnitude of interest rate cut by the Fed. A few weak earnings results also dented investors’ confidence on risky assets like equities. All three major stock indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) plummeted 1.1% or 411.32 points to close at 38,441.54. 27 components of the 30-stock index ended in negative territory, while three in positive zone. The tech-heavy Nasdaq Composite finished at 16,920.58, sliding 0.6% due to weak performance by U.S. technology behemoths.

The S&P 500 tumbled 0.7% to finish at 5,266.95. All 11 broad sectors of the broad-market index ended in negative territory. The Materials Select Sector SPDR (XLB), the Industrials Select Sector SPDR (XLI), the Utilities Select Sector SPDR (XLU) and the Energy Select Sector SPDR (XLE) declined 1.4%, 1.4%, 1.3% and 1.8%, respectively.

The fear-gauge CBOE Volatility Index (VIX) was up 10.5% to 14.28. A total of 12.24 billion shares were traded on Wednesday, lower than the last 20-session average of 12.32 billion. Decliners outnumbered advancers on the NYSE by a 5.25-to-1 ratio. On Nasdaq, a 2.78-to-1 ratio favored declining issues.

Rate Cut and Yields Spike Concerns

The CME FedWatch currently assigned a 56% probability that the Fed will cut the benchmark lending rate by 25 basis points in November and a 77.5% chance that the Fed fund rate will be reduced by 25 basis points in December. Expectations of more than one rate cut is a distant possibility now.

As investors remained concerned for higher rate for longer, a recent auction of U.S. government bonds by the Treasury Department received weak demand. As a result, yields on different Treasury Securities spiked. The yield on the benchmark 10-Year U.S. Treasury Note touched 4.6%, crossing the technically crucial 4.5% level.

Higher market risk-free interest rate is detrimental to equity markets. This will increase discount rate thereby reducing the net present value of stock investment. Further, higher interest rate will drive up borrowing costs, hurt consumer spending and make money market funds more attractive.

Weak Earnings Results

Bank of Montreal BMO came out with quarterly earnings of $1.91 per share, missing the Zacks Consensus Estimate of $2.01 per share. This compares to earnings of $2.16 per share a year ago. These figures are adjusted for non-recurring items. BMO posted revenues of $5.88 billion for the reported quarter, missing the Zacks Consensus Estimate by 1.33%. This compares to year-ago revenues of $6.22 billion.

Advance Auto Parts Inc. AAP reported adjusted earnings of $0.67 per share for first-quarter 2024, which missed the Zacks Consensus Estimate of $0.69. The company reported an adjusted earnings per share of $0.72 in the year-ago quarter.

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AAP generated net revenues of $3.41 billion, which missed the Zacks Consensus Estimate of $3.43 billion on lower-than-expected comparable store sales. Comparable store sales decreased 0.2% year over year. We projected a rise of 0.7% for the same. The top line dipped 0.3% year over year.

Columbus McKinnon Corp. CMCO came out with quarterly earnings of $0.75 per share, missing the Zacks Consensus Estimate of $0.84 per share. This compares to earnings of $0.80 per share a year ago. These figures are adjusted for non-recurring items. CMCO posted revenues of $265.5 million for the reported quarter, missing the Zacks Consensus Estimate by 1.67%. This compares to year-ago revenues of $253.84 million.

Consequently, shares of Bank of Montreal, Advance Auto Parts and Columbus McKinnon plunged 9.5%, 11% and 7.5%, respectively. Columbus McKinnon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Zacks Investment Research