ASX expected to lift after strong day on Wall Street
By Echo Wang
The Australian share market is expected to rally following a strong lead in from US share markets on the back of better-than-expected unemployment data.
Wall Street’s main indexes closed higher led by growth stocks in light trading, as US unemployment data signalled the Federal Reserve’s interest rate hikes might be starting to dent labor market strength in its bid to fight inflation.
All 11 S&P 500 sector indexes rose, with communication service and technology as the biggest winner with gains of nearly 3 per cent.
“It’s just relief,” said Keith Buchanan, portfolio manager at GLOBALT Investments in Atlanta. “Selling pressure has been overwhelming the market recently and we could be having a break. That allowed room for stocks to move, and with lower volume (that) can materialise into a pretty good day.”
Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc, whose shares have been battered in the past few sessions, each gained more than 2.5 per cent.
The US Labor Department reported an increase in the number of Americans filing new claims for unemployment benefits last week. But the data indicates a tight US job market even as the Fed works to cool demand for labor in its bid to lower inflation.
The yield on 10-year Treasury notes fell 2.2 basis points to 3.864 per cent on the news.
The Fed’s aggressive interest rate hikes have hammered equities this year, with the benchmark S&P 500 shedding 19.3 per cent and the tech-heavy Nasdaq tumbling nearly 33 per cent.
The technology, consumer discretionary and communication services sectors – which house several rate-sensitive high-growth shares – are down between 29 per cent and 40 per cent this year, making them the worst performers among S&P 500 sector indexes.
Energy shares have bucked the trend with stellar annual gains of 57 per cent.
Wall Street’s main indexes dropped more than 1 per cent on Wednesday, with the Nasdaq Composite Index hitting a 2022 closing low as rising COVID cases in China and geopolitical tensions added to fears of a likely recession in 2023.
However, investor preference for high-dividend yielding stocks with steady earnings has limited losses in the Dow Jones Industrial Average, which is down just 8.5 per cent for the year.
The Dow rose 345.09 points, or 1.05 per cent, to 33,220.8; the S&P 500 gained 66.06 points, or 1.75 per cent, at 3,849.28; and the Nasdaq Composite added 264.80 points, or 2.59 per cent, at 10,478.09.
Tesla Inc shares rose after chief executive Elon Musk told staff they should not be “bothered by stock market craziness.”
For 2022, Tesla’s 66 per cent slump and Amazon.com’s 50 per cent drop played a big part in the S&P 500 consumer discretionary sector’s 38 per cent loss. Some $US1.6 trillion worth of shareholder value evaporated after investors abandoned high-growth stocks with pricey earnings multiples.
Volume on US exchanges was 8.78 billion shares, compared with the 10.95 billion average for the full session over the last 20 trading days.
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Source: Thanks smh.com