By Sinéad Carew and Shristi Achar A
(Reuters) - The S&P 500 and the Nasdaq managed to eke out tiny gains on Thursday while the Dow Industrial Average ended slightly lower with pressure from tech and retail bellwethers Cisco and Walmart (NYSE:WMT) after disappointing forecasts.
Shares of Cisco Systems (NASDAQ:CSCO) tumbled 9.8% as the communications and networking technology company cut its full-year revenue and profit forecasts on slowing demand for its networking equipment. Also in technology, Palo Alto Networks shares fell 5.4% after its forecast late Wednesday for second-quarter billings missed expectations.
Walmart shares sank 8.1% a day after touching a record high. The retail giant said U.S. consumers were spending cautiously because of inflation, even as it raised its annual forecast for sales and profit.
This helped send the S&P 500 consumer staples index down 1.2% and weighed on retailers with Dollar General (NYSE:DG) and Dollar Tree (O:DLTR) both falling 4.2%.
Also, Target (NYSE:TGT) fell 0.4%, giving back some gains from the previous session in which it soared 17.8% after providing a bullish strong holiday-quarter outlook.
Earlier this week, Wall Street indexes had rallied sharply with data signaling cooling U.S. inflation and fueling hopes the U.S. Federal Reserve is done hiking interest rates. Also, passage this week of a stop-gap bill to avert a government shutdown eased some nerves.
Given that Cisco and Walmart are "a backbone of their respective industries", Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest said their weakness "calls a little bit into question the health of the consumer and maybe the health of the technology sector."
But others noted positive counter forces in Thursday's session, with gains in megacaps including Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL) and Nvidia.
"The major indexes are pretty much flat on the day, but you're still seeing a lot of strength in big-cap tech or growth. It's just a continuation of the positive narrative we've seen in the market recently," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
Specifically, Ghriskey cited investor relief that the Federal Reserve appears to be done with its rate hiking cycle.
Earlier, a Labor Department report showed weekly jobless claims had risen more than expected, cementing bets that the Fed will not need to raise rates further.
The Dow Jones Industrial Average fell 45.74 points, or 0.13%, to 34,945.47, the S&P 500 gained 5.36 points, or 0.12%, to 4,508.24 and the Nasdaq Composite added 9.84 points, or 0.07%, to 14,113.67.
Energy, down 2.1% led declines among the 11 major S&P sectors, hitting a four-month low as crude prices settled down almost 5%. [O/R]. Communications services, up 0.9% was the sector with the strongest advance during the session followed by information technology, up 0.7%.
"The big driver today is the tug-of-war between those who want to sell on rallies and those who want to buy on dips," said Brian Jacobsen, chief economist at Annex Wealth Management.
"Economic data hasn’t been bad enough to trigger too many recession fears, but it hasn’t been good enough to engender too much enthusiasm. We’re entering a period with the holidays where small surprises can have outsized influences on prices."
Money markets have fully priced in a probability that the Fed will hold rates steady in December, and see about a 62% chance of a rate cut in May of at least 25 basis points, according to CME Group's (NASDAQ:CME) FedWatch tool.
Among individual stocks, Macy's (NYSE:M) shares rallied 5.7% after the department store operator's quarterly sales beat analysts' estimates.
Declining issues outnumbered advancing ones on the NYSE by a 1.42-to-1 ratio; on Nasdaq, a 1.97-to-1 ratio favored decliners.
The S&P 500 posted 15 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 40 new highs and 123 new lows.
On U.S. exchanges 10.71 billion shares changed hands compared with the 11.09 billion average for the last 20 sessions.