Dow Jones Industrial Average tumbles 600 points on Thursday as rate cut hopes deflate

NEW YORK (May 23) The Dow Jones Industrial Average (DJIA) tumbled on Thursday, falling over 600 points and slipping back to the 39,000.00 level as investors pulled back in the face of declining hopes for a September interest rate cut from the Federal Reserve (Fed).

May’s S&P Global Services Purchasing Managers Index (PMI) rose to a 12-month high of 50.9 on Thursday, well above the forecast steady print at 50.0. Accelerating services activity bodes poorly for investors desperate for signs of a rate trim from the Fed. Fitch Ratings warned the entire market on Wednesday that services inflation will likely remain sticky for some time, keeping rates elevated for much longer than many investors have been hoping for.

According to the CME’s FedWatch Tool, rate traders are pricing in barely 50% odds of at least a quarter-point cut from the Fed in September, down significantly from the 70% odds priced in at the beginning of the trading week. US data will have one last chance to throw investors a bone on Friday, with US Durable Goods on the table.

US Durable Goods in April are expected to decline -0.8% MoM, down sharply from the previous month’s 2.6%. The University of Michigan’s Consumer Sentiment Index in May is forecast to tick upwards to 67.5 from the previous period’s 67.4, while UoM 5-year Consumer Inflation Expectations are expected to remain pinned at 3.1% in May.

Dow Jones news

The Dow Jones is sharply lower on Thursday as the US market’s worst-performing equity index. All of the Dow Jones' constituent securities are in the red for the day, with losses led by Boeing Co. (BA), which is getting absolutely shattered. BA tumbled -7.5% to $172.40 per share after the company announced negative cash flow with no expectations of the battered airplane manufacturer’s deliveries recovering in the second quarter.

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