Traders work on the floor of the New York Stock Exchange (NYSE) on the first trading day of 2024 on Jan. 2, 2024 in New York City.
Spencer Platt | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Trump guilty in hush money trial
A New York jury convicted former President Donald Trump on all 34 felony charges of falsifying business records related to a hush money payment to porn star Stormy Daniels by his then-personal lawyer before the 2016 election. Trump is the first former U.S. president to be convicted of a crime. His sentencing is set for July 11 at 10 a.m. ET, just four days before the Republican National Convention in Milwaukee, where Trump is expected to be confirmed as the GOP’s presidential nominee. Trump, who remains free without bail, faces a maximum sentence of four years in prison for each count.
Saleforce sinks stocks
Wall Street closed lower after Salesforce had its worst day in two decades. The Dow Jones Industrial Average dropped 330 points. The S&P 500 and the Nasdaq Composite both lost ground. Nvidia fell for the first time since its earnings last week and Microsoft had its worst day since October. The yield on the 10-year Treasury slipped below 4.6% but remained above 4.5%, a level at which investors may consider switching out of stocks for better returns elsewhere. U.S. oil prices fell 1% and are on track for their worst month of the year as demand for gasoline remains soft.
Dell drops despite AI growth
Shares of Dell fell as much as 20% in extended trading after its first-quarter earnings met Wall Street’s expectations. Still, Dell’s shares had more than doubled in value before Thursday’s earnings. The company has become a leading vendor for AI-oriented servers, which are in high demand as businesses invest in infrastructure for predictive analytics and generative AI.
Foot baller
Foot Locker‘s shares surged more than 30% as the sneaker retailer’s turnaround plan delivered better-than-expected comparable sales. “We had a solid start to the year in the first quarter, which demonstrates that our Lace Up Plan is working,” CEO Mary Dillon told CNBC in an interview.
Asia-Pacific markets rise
Markets in the Asia-Pacific region were trading higher as investors waded through economic data releases. Japan’s Nikkei 225 jumped 1% after inflation in Japan’s capital, Tokyo, rose 1.9%, in line with expectations. South Korea’s Kospi climbed 0.1% after the country’s industrial production index beat expectations, rising 2.2%. Mainland China’s CSI 300 index rose 0.1%, and Hong Kong’s Hang Seng added 0.4%.
[PRO] AI power boom
ChatGPT search queries are estimated to be six to ten times more power-intensive than regular Google searches. As demand for artificial intelligence increases, power grids will come under pressure. Goldman Sachs has selected some global stocks that could benefit from this boom.
The bottom line
Want to gauge the health of the U.S. economy? Ask a retail CEO. After all, consumer spending, the lifeblood of the economy, accounts for roughly two-thirds of GDP.
“The customer has been under pressure; prolonged inflation, interest rates that effect everything from house payments to your student loans, less savings… our customers are willing to pay full price, they are going to be very picky for when they spend their money and how.” Foot Locker CEO Mary Dillon told CNBC in an interview.
This earnings season has underscored Dillon’s point. While retailers like Foot Locker, Best Buy, Dollar General, and American Eagle Outfitters beat profit estimates, their revenue largely met or fell short of analyst forecasts. This suggests that companies are having to work harder to entice increasingly cautious consumers, who are now more selective about where and when they spend their hard-earned dollars.
The broader economic picture has also lost some of its shine since the end of last year. The Commerce Department revised first-quarter GDP growth downward to 1.3%, a notable decrease from the initial estimate of 1.6%. And probably the most important part of the read was the reduction of consumption, from 2.5% growth to 2%.
April’s pending home sales slumped to the lowest level since the pandemic, further underscoring consumer struggles.
New York Federal Reserve President John Williams reiterated Thursday recent statements from the central bank that inflation is still too high. On Interest rates, he said: “I do think that monetary policy is restrictive and is bringing the economy a better balance. So I think at some point, interest rates within the US will, based on data analysis, eventually need to come down. But the timing will be driven by how well you achieve your goals.”
The Fed’s target for inflation remains 2% and investors will be watching closely Friday’s Commerce Department inflation data. The personal consumption expenditures price index — the Fed’s preferred inflation number — is expected to come in at 2.7% for April, according to the Dow Jones estimate.
It’s not only the markets that are yearning for an interest rate cut; retailers also need consumers to open up their wallets, and that’s only going to happen when they feel the Fed is pulling for them.
— CNBC’s Dan Mangan, Jeff Cox, Alex Harring, Hakyung Kim, Leslie Josephs, Robert Hum, Diana Olick, Spencer Kimball and Yun Li contributed to this report.