Walmart drove the market lower after falling 6.5%, even though the retailer reported stronger profit for the latest quarter than analysts expected. The Bentonville, Arkansas-based giant gave a forecast for upcoming profit that fell short of analysts' expectations as shoppers across the country deal with still-high inflation and the threat of tariffs from President Donald Trump.
Walmart is still forecasting growth in revenue for this upcoming year and said it has experience in navigating the effects of tariffs, but its profit outlook helped pull stocks lower across the retail industry. Costco fell 2.6%,Target dropped 2% and Amazon lost 1.7%.
Palantir Technologies was another weight on the market. It fell 5.2% to follow its 10.1% drop from the day before, after U.S. Defense Secretary Pete Hegseth said he wants to cut $50 billion in spending next year. The software company got 55% of its $2.9 billion in revenue last year from government customers.
They helped offset an 8.5% jump for Baxter International, which reported better profit for the latest quarter than analysts expected. It credited strength for its pharmaceuticals business, as well as for its medical products and therapies.
Burger chain Shake Shack rallied 11.1% after likewise reporting a stronger profit than expected. CEO Rob Lynch said sales trends remained solid during the quarter, even though bad weather around the country and wildfires in the Los Angeles area kept some customers away.
Chinese e-commerce giant Alibaba saw its stock that trades in the United States climb 8.1% after reporting stronger profit for the latest quarter than analysts expected. It also talked up its artificial-intelligence developments.
All told, the S&P 500 fell 26.63 points to 6,117.52. The Dow Jones Industrial Average dropped 450.94 to 44,176.65, and the Nasdaq composite sank 93.89 to 19,962.36.
In the bond market, Treasury yields edged lower after a report showed more U.S. workers applied for unemployment benefits last week than economists expected. It's an indication the pace of layoffs could be worsening, but the number still remains relatively low compared with history.
A separate report said growth for manufacturing in the mid-Atlantic region is still growing, but not as strongly as economists expected.
Such numbers are likely to keep the Federal Reserve on hold when it comes to interest rates. Last month, the Fed refrained from cutting its main interest rate for the first time at a policy meeting since it began doing so in September.
While lower rates can boost the economy and prices for investments, they can also give inflation more fuel. And Fed officials were discussing at their last meeting how Trump's proposed tariffs and mass deportations of migrants, as well as strong consumer spending, could push inflation higher this year.
The yield on the 10-year Treasury fell to 4.50% from 4.54% late Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for upcoming Fed moves, held steadier. It remained at 4.27%, where it was late Wednesday.
Traders have been paring back their expectations for how many cuts to interest rates the Fed may deliver this year, with some predicting zero. Many are pointing the potential effects of tariffs, but much of Wall Street is also banking on their ultimate impact being smaller than they initially seemed.
“Given the high political costs of elevated inflation, we continue to believe that the Trump administration will not want to jeopardize US economic growth or risk higher inflation through broad and sustained tariffs,” said Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management.
Trump has already given brief, 30-day reprieves for tariffs he had announced on Mexico and Canada to give time for more negotiations.
In stock markets abroad, indexes fell across much of Europe and Asia.
Hong Kong’s Hang Seng fell 1.6% for one of the world’s larger moves after China’s central bank left its benchmark interest rate unchanged, in a move it said was meant to maintain financial stability. Stocks in Shanghai edged down by less than 0.1%.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
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