ASX edges higher after Wall Street rally
By Stan Choe and Alex Veiga
The Australian sharemarket edged up on Monday, buoyed by the energy and information technology sectors, following a rally on Wall Street.
The S&P/ASX 200 was up 9 points, or 0.1 per cent, at 7,461.2 at the open, as several key commodity prices climbed.
Brent oil prices increased 1.7 per cent, boosting heavyweight Woodside (up 0.5 per cent) and Santos (up 0.9 per cent). The biggest large-cap advancers were lithium miners Pilbara Minerals (up 4.6 per cent) and Allkem (up 2.3 per cent). Information technology (up 1.1 per cent) led the climb, including accounting software company Xero (up 1.5 per cent)
Despite energy companies broadly lifting the index, Meridian Energy was the biggest large-cap decliner, losing 1.8 per cent. Industrials (down 0.1 per cent) and consumer discretionary (down 0.1 per cent) slightly weighed on the index, as Wesfarmers shed 0.9 per cent.
A rough week on Wall Street dominated by worries about a weakening economy ended Friday with a broad rally that gave the market its best day in two weeks.
The S&P 500 rose 1.9 per cent. Despite the gains, the benchmark index still ended with its first weekly loss in the last three. The Dow Jones Industrial Average rose 1 per cent and the Nasdaq composite closed 2.7 per cent higher.
Technology and communication services stocks powered much of Wall Street’s gains as investors cheered another big quarterly surge in Netflix’s subscribers. Remarks from a Federal Reserve official also helped build hope among investors that the central bank may decide to slow its pace of interest rate hikes as soon as next month.
Making things more complicated, several Fed officials through the week kept pounding the message that they’ll likely hike rates further and then hold them there a while to make sure the nation’s high inflation is really crushed. Even though inflation has begun to slow, upward pressure remains on it from a still-solid US jobs market and other factors.
Many investors on Wall Street came into this week already forecasting a modest or short recession, but they also were hoping rate cuts by the Fed later this year could mean a rebound for markets. This week’s sour economic data and comments from central bankers threaten such forecasts.
But on Friday, Fed Governor Christopher Waller said he favours just a quarter-point hike on February 1, when the central bank gives its next interest rate policy update. Waller also said that rates are already high enough to be slowing the economy. The remarks could have helped calm rising-rate worries in the market.
“It’s important when you hear Federal Reserve members endorsing that,” said Quincy Krosby, chief equity strategist for LPL Financial.
Gains for tech-oriented stocks accounted for a big share of the S&P 500’s rally Friday. Google’s parent company said it was cutting costs by laying off 12,000 workers, and Netflix reported a surge in its number of subscribers.
Netflix’s surprising report late Thursday helped set the stage for Friday’s rally, because the market had feared the streaming service’s latest results would be disappointing and fuel worries about weaker earnings overall, said Jay Hatfield, CEO of Infrastructure Capital Advisors.
“When they started rocketing, then all the Nasdaq started moving, and that moves the S&P and everything else follows,” Hatfield said.
Alphabet rose 5.3 per cent after becoming the latest Big Tech company to acknowledge it expanded too quickly in recent years amid a boom created by the pandemic. Netflix jumped 8.5 per cent.
Cruise lines also notched gains. Carnival rose 3.5 per cent, Norwegian Cruise Lines climbed 4.5 per cent and Royal Caribbean added 3.6 per cent.
Also influencing the market on Friday: the expiration of $US797 billion ($1.14 trillion) in stock-option contracts. That’s the largest amount for single stock options since January 2022 and the fourth-largest on record, according to Goldman Sachs.
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