ASX set to edge higher despite more Wall Street losses
By Damian Troise
US stocks are slipping in Monday (US time) afternoon trading to tack more losses onto last week’s stumble, as worries about inflation worries continue to dog Wall Street.
Tech stocks once again were taking the brunt of the losses, and they helped pull the S&P 500 down by 0.3 per cent in late trade. The benchmark index is coming off a 1.4 per cent weekly drop from its record high, which would have been even worse if not for a rebound in the back half of last week.
The Dow Jones Industrial Average is 0.1 per cent lower and the the Nasdaq composite, which is full of tech-oriented stocks, was down 0.6 per cent, more than other indexes.
Despite the soft lead, the ASX is set to inch higher at the open, with futures at 5.02am AEST pointing to a gain of 8 points, or 0.1 per cent, at the open.
The majority of stocks across Wall Street are falling, but gains for energy companies and producers of raw materials were helping to limit the losses. They’re the latest back-and-forth eddies for a market swept up in worries about whether the rising inflation seen recently across the economy will prove to be only temporary or longer lasting.
If it’s the latter, the fear is that the Federal Reserve will dial back the extensive support it’s providing to markets, including record-low interest rates and the monthly purchase of $US120 billion ($154 billion) in bonds.
The yield on the 10-year Treasury has shot higher this year amid the inflation fears. It was at 1.64 per cent in afternoon trading, up slightly from 1.63 per cent at the end of last week. It began the year close to 0.90 per cent.
Higher interest rates drag on most of the stock market, but they hit particularly hard on stocks seen as the most expensive and those bid up for profits expected far in the future.
That has put extra pressure on tech stocks, which have been leading the market for years. Microsoft dropped 1.7 per cent, and Apple fell 1.6 per cent, helping to drag the tech sector to the sharpest loss among the 11 that make up the S&P 500.
In recent weeks, blowout profit reports from those tech titans and much of the rest of corporate America have helped validate the huge run stocks have been on for more than a year. The economy continues to strengthen as COVID-19 vaccinations roll out, and it helped the S&P 500 roar to an 11.3 per cent gain in the first four months of the year. That’s a bigger gain the market has had in half of the last 20 full years.
“History says whenever we’ve had such a strong start to the year we tend to take a break and digest some of those gains,” said Sam Stovall, chief investment strategist at CFRA. “In many ways this is fairly natural.”
Many analysts along Wall Street expect the strong profit growth to continue through the year for companies as the economy and job market continue to improve. But they’re not looking for stock prices to rise as quickly, particularly not after shares surged last year when profits cratered.
Steelmakers were making some of the market’s strongest gains on Monday following the suspension of key measures in a tariff dispute between the US and European Union. Nucor rose 3.2 per cent, and US Steel rose 2.5 per cent.
AT&T slipped 0.7 per cent, and Discovery dropped 5.1 per cent after the companies announced a $US43 billion deal that will combine several major media and streaming entertainment businesses. The new company folds in AT&T’s CNN and HBO channels with Discovery’s Food Network and HGTV.
European stock markets were mostly lower, while Asian markets ended mixed.
AP
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