Dow plunges over 600 points as Wall Street worries rates will stay high

Stocks fell on Thursday, even as a strong revenue forecast for Nvidia prompted a surge in its shares, but that was overshadowed by economic data showing inflation was still a concern.

The Dow Jones Industrial Average slid 605.78 points, or 1.5%, to 39,065.26, its worst day of 2024. The S&P 500 lost 0.7%, and the Nasdaq slipped 0.4%.

Nvidia shares jumped 9% to climb above the $1,000 per share mark and helped boost the Nasdaq and S&P 500 to intraday records in the early stages of trading after the AI chip company forecast quarterly revenue above estimates and announced a stock split.

But stocks lost ground after economic data showed US price pressures increased in May even as business activity accelerated and as lower weekly jobless claims indicated the labor market remains on firm footing.

“It may be speaking to the fact that people are now positioned for disappointing growth data, slower inflation data, rate cuts, and this morning… it caught people wrong footed,” said Brian Nick Senior Investment Strategist at The Macro Institute in New York.

“Anything that looks like good news is still being greeted as bad news, which shows we’re still in this sort of Fed relief rally period where the market’s generally happy that interest rates have stopped going up, but the worst thing would be for interest rates to continue going up at this point.”

The rally in equities to record highs this month has been fueled in part by AI optimism, a solid earnings season and renewed hopes for rate cuts by the Fed this year. Nvidia shares are up about 11% this year after surging roughly 240% in 2023.

Markets are now pricing in a 52.2% chance for a rate cut of at least 25 basis points (bps) in September, down from the nearly 67% a week ago, according to CME’s FedWatch Tool.

The Dow was dragged lower in part by a tumble of more than 7% in Boeing after the planemaker forecast negative free cash flow in 2024 due to sluggish deliveries.

DuPont announced plans to split into three publicly traded companies. Shares of the conglomerate were edged up 0.5%, sharply off earlier highs.

Ticketmaster-owner Live Nation slumped nearly 8% after the uJustice Department and a group of 30 states and the District of Columbia Thursday sued to break up the concert promoter.