US stocks lose steam after Dow hits milestone 40,000 mark

The blue-chip index has recovered from its October 2022 lows, powered by resilient U.S. economic growth despite steep rate hikes by the .

Ten out of 11 S&P 500 sectors closed lower, with stocks in consumer staples the only top gainer.

"We've had a big rally and people are looking at multiples, saying 'we've got great earnings growth this year and next year but it's still priced in at 21 or 22 times forward earnings,'" said Thomas Hayes, chairman of Great Hill Capital in New York.

"We have a lot of good news and a lot of that is priced in and that's what the is grappling with right now," Hayes added.

Investors are betting on two quarter-point cuts from the Federal Reserve this year, and estimate a 70% chance of the first reduction in September, according to the CME FedWatch Tool.

All three Wall Street indexes had reached record closes on Wednesday after data showed a smaller-than-expected rise in consumer prices in April, indicating that inflation had resumed its downward trend.

Data on Thursday also showed the number of Americans filing new claims for jobless benefits fell last week, though labor market conditions remain fairly tight even as job growth is cooling.

"The current environment seems to focused on what the Fed may or may not do, given that we had started the year with the expectation that the Fed will cut rates up to six times but that moved down more recently to one or two times," said Silas Myers, chief executive and portfolio manager at Mar Vista Investment Partners in Los Angeles.

The Dow Jones Industrial Average fell 38.62 points, or 0.10%, to 39,869.38, the S&P 500 lost 11.05 points, or 0.21%, to 5,297.10 and the Nasdaq Composite lost 44.07 points, or 0.26%, to 16,698.32.

rose 7% after the retail giant raised its fiscal 2025 sales and profit forecast, betting on easing inflation to further boost demand for essentials.

dropped 4.8% after the farm equipment maker trimmed its annual profit forecast for the second time.

U.S.-listed shares of Swiss insurer gained 4.7% after Warren Buffett's revealed a $6.7 billion stake in the company. and AMC Entertainment slid 30% and 15%, respectively, with the so-called meme stocks extending Wednesday's losses following a two-day rally sparked by the social media return of "Roaring Kitty" Keith Gill.

About 17.8 billion shares changed hands across U.S. exchanges, compared with the average of about 11.5 billion shares over the last 20 sessions.

Declining issues outnumbered advancers by a 1.2-to-1 ratio on the NYSE. On the Nasdaq, 1,965 stocks rose and 2,301 fell as declining issues outnumbered advancers by a 1.17-to-1 ratio.

The S&P 500 posted 64 new 52-week highs and one new low while the Nasdaq recorded 188 new highs and 58 new lows.