Joey Solitro
Stocks appeared poised to build on Wednesday's Fed-fueled gains, opening higher across the board Thursday. However, the main indexes quickly swung into negative territory following a round of disappointing economic data.
Specifically, the Institute for Supply Management said its Manufacturing Purchasing Managers Index (PMI) fell to 46.8% in July from 48.5% in June. Readings below 50% indicate contraction – and this was the fourth straight month the index came in below the key level.
"U.S. manufacturing activity entered deeper into contraction," said Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee. "Demand was weak again, output declined, and inputs stayed generally accommodative."
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Meanwhile, U.S. construction spending fell 0.3% in June, missing economists' expectations for a 0.2% rise. The May figure was revised lower to a decline of 0.4% vs the previously reported 0.1% drop.
"The short-lived satisfaction of Fed Chief Powell communicating decent odds of a September rate cut has turned sour as investors are now panicking that the central bank isn't trimming soon enough," says José Torres, senior economist at Interactive Brokers.
In addition to the weak economic data, Torres says that following this morning's rate cut from the Bank of England (BoE), "market players are also worried that the U.S. is among the last to begin accommodating monetary policy."
According to CME Group's FedWatch Tool, futures traders are pricing in an 82% chance the central bank will cut rates by a quarter-percentage point in September.
Meta goes all in on AI
In earnings news, Meta Platforms (META) stock soared 4.8% after the Facebook parent topped expectations for its second quarter. The company also raised the low end of its full-year capital expenditures outlook and said it expects "significant capex growth in 2025" to support artificial intelligence (AI) research and product development efforts.
"We think greater AI integration and product enhancements not only support user engagement but also capture greater interest from 18 to 29-year-olds – an area where META has lagged peers," says CFRA Research analyst Angelo Zino, who reiterated a Buy rating on the stock.
The analyst also sees "growth prospects tied to expanding generative AI features," and improvements in rankings and recommendations.
Carvana rallies after earnings
Elsewhere, Carvana (CVNA) stock jumped 10.1% after the online auto retailer reported a surprise profit for its second quarter. The company's revenue also came in higher than expected.
It wasn't even two years ago that Carvana appeared to be on the brink of bankruptcy. But in 2024, the consumer discretionary stock has been one of the best performers on the price charts, up more than 200%.
Arm stock sinks on soft outlook
On the negative side of the ledger was Arm Holdings (ARM), which plunged 15.7% after the chipmaker reported earnings. While Arm disclosed higher-than-expected fiscal first-quarter earnings of 40 cents per share on revenue of $939 million, its full-year outlook came in soft vs what Wall Street expects.
This is the first time Arm hasn't raised its outlook after earnings, says Needham analyst Charles Shi (Hold), which "could be seen as a negative for the stock that trades at a sky-high valuation."
As for the main indexes, the Dow Jones Industrial Average finished the day down 1.2% at 40,347, the S&P 500 fell 1.4% to 5,446, and the Nasdaq Composite plunged 2.3% to 17,194.
Related content
- The Fed Is About to Cut Rates. What Should Investors Do?
- The Best Large-Cap Stocks to Buy
- Paris Olympics: 5 Sports-Related Stocks Going for Gold
-
Dow Adds 646 Points, Hits New Highs: Stock Market TodayIt was "boom" for the Dow but "bust" for the Nasdaq following a December Fed meeting that was less hawkish than expected.
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
Dow Adds 646 Points, Hits New Highs: Stock Market Today
It was "boom" for the Dow but "bust" for the Nasdaq following a December Fed meeting that was less hawkish than expected.
-
I'm a Tax Attorney: These Are the Year-End Tax Moves You Can't Afford to MissDon't miss out on this prime time to maximize contributions to your retirement accounts, do Roth conversions and capture investment gains.
-
I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement IncomeSpreading savings across three "tax buckets" — pretax, Roth and taxable — can help give retirees the flexibility to control when and how much taxes they pay.
-
Dow Rises 497 Points on December Rate Cut: Stock Market TodayThe basic questions for market participants and policymakers remain the same after a widely expected Fed rate cut.
-
Could an Annuity Be Your Retirement Safety Net? 4 Key ConsiderationsMore people are considering annuities to achieve tax-deferred growth and guaranteed income, but deciding if they are right for you depends on these key factors.
-
I'm a Financial Pro: Older Taxpayers Really Won't Want to Miss Out on This Hefty (Temporary) Tax BreakIf you're age 65 or older, you can claim a "bonus" tax deduction of up to $6,000 through 2028 that can be stacked on top of other deductions.
-
JPMorgan's Drop Drags on the Dow: Stock Market TodaySmall-cap stocks outperformed Tuesday on expectations that the Fed will cut interest rates on Wednesday.
-
Meet the World's Unluckiest — Not to Mention Entitled — Porch PirateThis teen swiped a booby-trapped package that showered him with glitter, and then he hurt his wrist while fleeing. This is why no lawyer will represent him.
