Dow falls by more than 600 points as markets continue to fret about a rate cut

The Dow tumbled by more than 600 points Thursday afternoon as all three major indexes moved lower, even after AI-darling Nvidia delivered stellar quarterly earnings and announced a 10-for-1 stock split.

Chipmaker Nvidia soared more than 9% as the wider market dropped lower, highlighting a lack of market breadth.

The S&P 500 and Nasdaq Composite, which began the day at new intraday highs, fell by 0.8% and 0.5%, respectively.

The selloff came after the Purchasing Managers Index for May, expected to fall slightly, came in 3.5 percentage points higher, the highest level since last June. That’s an indication that the economy is not being held back by inflation, even though price hikes have started to ease once more.

“Tech is the only industry sector not in the red,” wrote Louis Navellier of Navellier Investing in a note to clients on Thursday. “If you don’t have NVIDIA in your index it’s not a good day.”

The Federal Reserve spooked markets on Wednesday afternoon when they released the notes from their last policy meeting.

The minutes showed that “various” officials said they would be willing to raise interest rates if necessary and that there were doubts as to whether financial conditions are restrictive enough to keep inflation from resurging.

Goldman Sachs CEO David Solomon also said Wednesday at an event hosted by Boston College that the Fed probably won’t begin to cut rates this year.

“I’m still at zero cuts,” he said. “I think we’re set up for stickier inflation.”

“The bond market set the dour mood that we see across much of the market,” wrote Interactive Brokers chief strategist Steve Sosnick on Thursday.

US Treasury yields rose Thursday on the positive economic news.

“Coming on the back of yesterday’s ‘higher for longer’ Fed Minutes, bond traders were in no mood to hear about a strengthening economy,” wrote Sosnick. “In theory, a stronger economy should be good for companies, and thus stocks, but because we are all so obsessed with the Federal Reserve and other central bank policymakers, we see most stocks trending lower as bond prices fall.”

Boeing weighed on markets on Thursday, dropping more than 7% after the beleaguered aircraft manufacturer said its cash flows were worse than expected this year. That caused concern amongst investors that its debt ratings could be classified as junk bonds.

This is a developing story and will be updated.