NEW YORK, May 23 (Xinhua) -- U.S. stocks ended lower on Thursday, as investors reassessed the likelihood of a rate cut in September after stronger-than-expected economic data.
The Dow Jones Industrial Average fell by 605.78 points, or 1.53 percent, to 39,065.26, notching its worst day of the year. The S&P 500 sank 39.17 points, or 0.74 percent, to 5,267.84. The Nasdaq Composite Index shed 65.51 points, or 0.39 percent, to 16,736.03.
Ten of the 11 primary S&P 500 sectors ended in red, with real estate and utilities leading the laggards by losing 2.16 percent and 1.70 percent, respectively. Meanwhile, technology bucked the trend by rising 0.56 percent.
The U.S. S&P Global Composite PMI improved to 54.4 in May's flash estimate, up from 51.3, indicating that business activity in the U.S. private sector continued to grow at a faster pace than in April. Meanwhile, the S&P Global Manufacturing PMI increased to 50.9 from 50.0 over the same period, signaling an expansion in the manufacturing sector. Additionally, the S&P Global Services PMI rose to 54.8 from 51.3.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the U.S. economic upturn has accelerated again after two months of slower growth, with the early PMI data signalling the fastest expansion for just over two years in May. The data put the U.S. economy back on course for another solid GDP gain in the second quarter.
Moreover, the U.S. labor market data exceeded estimates, raising concerns among investors that the Federal Reserve may not lower interest rates soon. Traders are now pricing in just a 51 percent chance that the Fed will cut rates in its September meeting, down from 58 percent on Wednesday and nearly 68 percent the prior week, according to the CME FedWatch Tool. A probability below 60 percent is generally seen as indicating that a rate cut is unlikely.
In other news, April's new home sales fell short of estimates, with an annualized rate of 634,000 compared to the expected 678,000. This decline suggests that builders have less economic confidence and are facing greater challenges in securing financing for new construction projects.
"The bond market set the dour mood that we see across much of the market," said Interactive Brokers chief strategist Steve Sosnick on Thursday. "Coming on the back of yesterday's 'higher for longer' Fed minutes, bond traders were in no mood to hear about a strengthening economy. In theory, a stronger economy should be good for companies, and thus stocks, but because we are all so obsessed with the Fed and other central bank policymakers, we see most stocks trending lower as bond prices fall."
Nvidia's shares surged more than 9 percent on Thursday, surpassing 1,000 U.S. dollars for the first time, after the AI leader exceeded Wall Street's high expectations for first-quarter earnings. The chip giant also raised its guidance, alleviating concerns that demand for AI might be waning. Meanwhile, Boeing weighed on markets on Thursday, dropping more than 7.5 percent after the beleaguered aircraft manufacturer said its cash flows were worse than expected this year.
