Closing Market Update

Published as of: May 16, 2024, 4:40 p.m. ET 

(Thursday market close) The Dow Jones Industrial Average^® ($DJI) ended slightly lower after briefly surpassing 40,000 for the first time behind stronger-than-expected quarterly results from Walmart (WMT). Other indexes also posted small declines but remained near all-time highs after encouraging inflation readings earlier this week buoyed investors.

Early Thursday, Walmart reported net income of $5.1 billion for the previous quarter, tripling its profit from the year-earlier period. The company also said it expected full-year sales to come in at the high end of the previous forecast for growth of 3% to 4%. Walmart shares jumped 7% to a record high close.

With earnings season winding down, investors are shifting focus to economic and inflation patterns and implications for Federal Reserve interest rate policy. Wednesday's cooler-than-expected Consumer Price Index (CPI) report brought some welcome relief for the market, boosting confidence Fed rate cuts may still happen this year.

The CPI report was "a step in the right direction," said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research. "Inflation doesn't appear to be reaccelerating, but it remains elevated. We expect inflation to continue to move lower but at a bumpy pace."

Here's where the major benchmarks ended:

• The S&P 500^® index (SPX) fell 11.05 points (0.2%) to 5,297.10; the Dow Jones Industrial Average declined 38.62 points (0.1%) to 39,869.38; the Nasdaq Composite^® ($COMP) shed 44.07 points (0.3%) to 16,698.32.
• The 10-year Treasury note yield (TNX) rose more than 2 basis points to 4.381%.
• The Cboe Volatility Index^® (VIX) dropped 0.03 to 12.42.

Walmart's strength fueled a strong day for consumer staples shares. The S&P 500 Consumer Staples ($SP500#30), which includes Walmart as well as companies like Coca-Cola (KO) and Procter & Gamble (PG), surged 1.5% to its highest level in over two years. 

Among other companies, Applied Materials (AMAT) fell 1.6% ahead of the semiconductor industry supplier's quarterly earnings report, which is expected after Thursday's close.

The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:

• Chubb (CB) gained 4.7% after Warren Buffett's Berkshire Hathaway (BRK/A), in a filing with regulators, reported it bought nearly 26 million shares of the insurer.
• Cisco Systems (CSCO) dropped 2.7%, erasing an initial rally that followed the technology company's stronger-than-expected quarterly earnings released after Wednesday's close. Cisco's results included a 13% year-over-year plunge in quarterly revenue.
• Deere (DE) fell 4.7% after the farm and construction machinery manufacturer lowered its full-year profit guidance. 
• GoodRx (GDRX) surged 11% after Raymond James & Associates (RJF) upgraded the digital health care company to "outperform" from "market perform," citing new management and improving margins.
• Meta Platforms (META) lost 1.7% following reports the European Union opened a probe into the company over child safety concerns on social media platforms Facebook and Instagram.
• Under Armour (UAA) tumbled 1.3% after the athletic apparel company's disappointing full-year guidance overshadowed better-than-expected quarterly earnings. The company also announced a restructuring plan that will involve laying off workers.

Earnings season is nearly complete, but a few major retailers remain on the calendar. Those include home improvement chain Lowe's (LOW) and department store franchise Macy's (M), which are scheduled to report quarterly results Tuesday. Next Wednesday brings earnings reports from two more retailers, Target (TGT) and TJX Companies (TJX), along with semiconductor leader Nvidia (NVDA).

The S&P 500 index is on track for its fourth consecutive weekly advance thanks in part to Wednesday's CPI report, which bolstered hopes that inflation may be resuming a downward path following a resurgence during the first quarter. 

Overall CPI rose 0.3% in April from March, slightly below expectations, while the core rate, which excludes food and energy, also rose 0.3%, matching expectations. The closely followed core CPI rose 3.6% from April 2023, its smallest annual advance in three years but still above the Fed's 2% long-term inflation target.

If inflation continues to ease, the Fed may have the confidence its leaders have said it needs to reduce rates for the first time in over four years. Many analysts are eyeing September as a potential time frame for an initial cut.

The April CPI report, along with weaker-than-expected Retail Sales numbers released the same day, "reinforced impressions of a slower U.S. economy following a recent downturn in jobs growth," Schwab Center for Financial Research analysts wrote.

Late Thursday, traders priced 67% odds federal fund rates will be at least one quarter-point lower following the Federal Open Market Committee's (FOMC) September meeting, based on the CME FedWatch Tool. 

Thursday's economic numbers also reflected some slowing. Housing starts and building permits both missed analysts' expectations at a seasonally adjusted annual rate of 1.36 million and 1.44 million, respectively. Consensus for starts was for a seasonally adjusted annual rate of 1.44 million units, according to Briefing.com, with permits seen at 1.49 million.

Also, the Philadelphia Fed Index, a measure of manufacturing health in that region, fell to 4.5 in May from 15.5 in April, below the 5.0 consensus.

Weekly Initial Jobless Claims came in slightly above expectations at 222,000, after a surprising jump to 232,000 the prior week. The latest claims figure is slightly higher than the average from earlier this year but not the kind of number that indicates dramatically slower jobs growth.