ASX set to rise as Fed minutes boost Wall Street

By Damian Troise and Alex Veiga

Stock indexes on Wall Street rose in choppy trading following the release of minutes from the Federal Reserve’s most recent interest rate policy meeting.

Investors were hoping the minutes from the meeting earlier this month would offer fresh insight into the central bank officials’ thinking as the Fed raises interest rates, among other moves, in a bid to tame the highest inflation in four decades.

Wall Street is on track to break its streak of seven-straight losing weeks..
Wall Street is on track to break its streak of seven-straight losing weeks..Credit:NYSE

The minutes show most of the officials at the meeting agreed that half-point increases to the Fed’s benchmark short-term rate “would likely be appropriate” at the central bank’s next two meetings, in June and July. Such an increase would be double the usual hike.

The S&P 500 is up 0.9 per cent in late trade while the Dow Jones has added 1 per cent and the tech-heavy nasdaq is 2.1 per cent higher. The indexes are on pace for a weekly gain, despite more up-and-down trading this week. The Australian sharemarket is set for a positive start to the session, with futures at 4.59am AEST pointing to a gain of 24 points, or 0.3 per cent, at the open.

Small-company US stocks made solid gains in a potential signal that investors had more confidence about prospects for economic growth. The Russell 2000 rose 1.8 per cent.

The yield on the 10-year Treasury, which helps set mortgage rates, held steady at 2.76 per cent.

The broader market remains volatile with investors on edge because of rising inflation and its impact on businesses and consumers. Investors are also concerned about the Fed’s aggressive plan to raise interest rates to fight inflation and hope the Fed won’t act so aggressively to slow the economy as to cause a recession.

“The overarching theme, especially for the past few weeks, is that investors are increasingly cautious on growth and the economic outlook,” said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management. “It’s one of the big reasons why you’re seeing the inability for the stock market to get any kind of momentum.”

Advertisement

Russia’s invasion of Ukraine in February added even more pressure to already rising energy costs, making inflation worse for both businesses and consumers. Supply chains became even tighter over the last month as China locked down several major cities to fight rising cases of COVID-19.

At the May 3-4 meeting, the Fed raised its key interest rate by a half-percentage point, its most aggressive move since 2000. It also signalled further large rate hikes to come. To tame inflation, the Fed wants to cool spending and economic growth by making it more expensive for individuals and businesses to borrow.

The minutes revealed that many of the policymakers agreed that after a rapid series of rate increases in the coming months, they could “assess the effects” of their rate hikes and, depending on the economy’s health, adjust their policies.

The economy has showed more signs of showing, and financial markets have dropped sharply, since the Fed meeting.

The S&P 500 gained ground on Monday, but slipped again on Tuesday, dragged down by more losses in the technology sector. The S&P 500 is coming off of a seven-week losing streak that came close to ending the bull market for stocks that began in March 2020.

Retailers had some of the strongest gains after getting beaten down in recent days over concerns that soaring inflation was eating into their profits. Some of those concerns dissipated after the high-end department store operator Nordstrom reported higher sales and raised its profit forecast. Its stock jumped 13.8 per cent.

Technology stocks also helped lift the market. Microsoft rose 1.7 per cent.

Several companies made strong gains after reporting solid financial results and giving investors strong forecasts, despite grappling with persistently rising inflation.

TurboTax software maker Intuit rose 9.1 per cent after raising its profit and revenue forecasts for the year. Caleres, the owner of Famous Footwear, surged 29 per cent after also raising its profit forecasts for the year.

Homebuilder Toll Brothers rose 8.8 per cent after reporting strong profits just a day after that sector stumbled amid a disappointing government report on newly built home sales.

Wendy’s jumped 10.1 per cent after Trian Fund Management, which already owns 19 per cent of the company, said it was considering buying the rest of the company.

European markets were higher and Asian markets closed mostly higher.

AP

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.

Most Viewed in Business

Source: Thanks smh.com