ASX set for losses as Wall Street slides lower
Stocks edged lower in afternoon trading on Wall Street on Wednesday, a day after the S&P 500 ended a six-day winning streak.
A report showing that inflation remained tame last month was encouraging for investors because it suggested the US economy is in a strong position to receive more stimulus without overheating.
The S&P 500 index was down 0.2 per cent in early afternoon trade. It was up as much as 0.5 per cent in the early going. The Dow Jones Industrial Average rose less than 0.1 per cent to 31,378 and the Nasdaq was down 0.3 per cent. All three are still trading near the record highs they reached in recent days.
It sets up the ASX for losses this morning, with futures at 4.52am AEDT pointing to a loss of 37 points, or 0.5 per cent, at the open.
The yield on the 10-year Treasury note fell to 1.14 per cent from 1.15 per cent late on Wednesday. It was as a high as 1.20 per cent earlier this week.
Nearly 60 per cent of the companies in the S&P 500 were making making gains, but a slide in technology stocks and companies that provide consumer services and products weighed down the index.
“Generally, the market has seen a very favourable backdrop and that likely remains the case going forward,” said Sal Bruno, chief investment officer at IndexIQ. “Inflation remains benign and there’s still going to be a pretty big stimulus package going forward.”
The Labor Department said Wednesday that US consumer prices rose 0.3 per cent in January, led by a surge in energy. Even though the gain was the biggest monthly increase since July, inflation over the past year has remained relatively low. Over the past year, inflation is up a modest 1.4 per cent. Core inflation, which excludes volatile food and energy costs, is also up 1.4 per cent with core prices unchanged in January.
Investors have started watching inflation metrics more closely as Democrats in Congress prepare to inject $US1.9 trillion ($2.5 trillion) of stimulus into the economy. US businesses are starting to reopen and millions of Americans are now vaccinated, meaning there could be a surge of economic activity and therefore potential inflation. Before Wednesday’s report, Treasury yields had been climbing steadily for weeks, which is typically a sign that investors expect both the economy to get better and for inflation to increase.
“Consumer price inflation remains very tame,” said Kathy Bostjancic, chief US financial economist at Oxford Economics.
Twitter and Under Armour jumped 7.8 per cent and 8.5 per cent respectively after delivering quarterly report cards that were much better than analysts were expecting. Twitter became the latest tech giant to report strong results despite the pandemic.
Energy companies were holding up well and making some of the broadest gains as oil prices edged higher, adding to a roughly 12 per cent gain so far in February. Devon Energy rose 4.3 per cent and Hess gained 3 per cent.
AP
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