US close: Dow rises but markets mixed as investors digest earnings, GDP data

dl nyse new york stock exchange new york city nyc wall street wall st nasdaq markets trading finance unsplash — Sharecast / David Vives via Unsplash

US stock markets finished in mixed fashion on Thursday, with sharp falls for Nvidia weighing on both the S&P 500 and Nasdaq, while the Dow Jones Industrial Average managed to eke out another record.

The Dow closed up 0.6% at a new high of 41,335.05, but a 6% drop in the share price of Nvidia kept the S&P 500 to a flat finish and pushed the tech-heavy Nasdaq down 0.2%.

Investors were having to deal with a barrage of economic data on Thursday – including upgrades to GDP estimates, stable jobless claims and an unexpected plunge in pending home sales to a record low – along with a wave of corporate earnings which led to some dramatic swings in the retail sector.

"There was a big risk that Nvidia’s results might disappoint the market and cause investor sentiment to sour, leading to profit taking on a broader basis. That doesn’t appear to have happened, thanks in part to positive economic data which has dampened fears of a US recession," said Dan Coatsworth, investment analyst at AJ Bell.

Economic data flurry in focus

The headline-grabbing data of the day was the revision to GDP figures for the second quarter, which showed that the annual rate of economic growth in the US more than doubled from the first three months of the year.

The secondary reading of GDP data showed that economic expansion accelerated to 3.0%, up from 1.4% growth in the first quarter and ahead of the 2.8% advance estimate due to higher consumer spending than previous thought.

Initial jobless claims fell by 2,000 to 231,000 last week, broadly in line with market expectations for a reading of 232,000, but still well above the average seen earlier in the year.

Also in focus on Thursday were housing market figures for July, which showed that the pending home sales index unexpectedly fell 5.5% to a record low, following a 4.8% jump the previous month. Economists had pencilled in a gain of around 0.5%.

In other news, the Census Bureau reported that US wholesale inventories rose 0.3% to $905.0bn in July, slightly ahead of forecasts for a 0.2% increase, while the US trade deficit in goods widened to a two-year high of $102.7bn in July, up from June's downwardly revised $96.6bn shortfall.

Retailers mostly lower, Nvidia out of favour

Shares in Dollar General tanked by 32% after the discount retailer revised its annual sales and profit forecasts downward, citing a reduction in consumer spending on discretionary items. Dollar General projected same-store sales for the 2024 financial year to increase by just 1.0% to 1.6%, a significant reduction from its previous estimate of a 2.0% to 2.7% rise. It also lowered its earnings per share forecast to a range of $5.50 to $6.20, down from the earlier projection of $6.80 to $7.55.

Sector peer Dollar Tree also sank 10%, while Home Depot, Walgreens and Target all finished with heavy losses.

US-listed shares of Birkenstock fell 16% after the German sandal maker underwhelmed investors despite a record third-quarter performance, as it narrowly missed consensus forecasts with its top line.

However, Best Buy was a bright spark in the sector, rising 14% after hiking its profit forecast for the year, amid a positive shift in consumer demand for electronics. The US retailer said it now expected adjusted earnings per share to reach as high as $6.35, up from a previous estimate of $6.20, citing stronger-than-anticipated profitability in the first half of the year.

Semiconductor giant Nvidia finished down 6% as investors reacted to its second-quarter earnings the previous evening. The company comfortably beat both revenue and profit forecasts, but after such an impressive run in the stock so far this year – up 160% as of Wednesday's close – expectations were already sky-high.

"Markets have a tendency to focus on the negatives when a company has seen such incredible gains, and this occasion appears to be a case of creating a negative narrative even in the absence of one," said Joshua Mahony, chief market analyst at Scope Markets. "For now, the fact that the Q3 outlook is only marginally above estimates does raise some questions over whether the pace of growth will slow from here."

Dow Jones - Risers

Intel Corp. (INTC) $20.13 2.65%
Visa Inc. (V) $274.32 1.91%
Apple Inc. (AAPL) $229.79 1.46%
Goldman Sachs Group Inc. (GS) $510.23 1.35%
Cisco Systems Inc. (CSCO) $50.39 1.08%
American Express Co. (AXP) $259.84 1.07%
Caterpillar Inc. (CAT) $351.47 0.99%
3M Co. (MMM) $133.02 0.99%
Chevron Corp. (CVX) $147.48 0.97%
Boeing Co. (BA) $172.14 0.91%