ASX falls after Wall Street’s worst day in two months

By Najma Sambul
Updated

The Australian sharemarket has opened lower after US stocks tumbled to their worst day in two months, buckling under worries about higher interest rates and their tightening squeeze on Wall Street and the economy.

The S&P/ASX200 dropped 57.20 points, or 0.78 per cent, to 7,279.10 at 10:15 am AEDT.

Wall Street has fallen sharply on its first trading day of the week.
Wall Street has fallen sharply on its first trading day of the week. Credit:AP

Most sectors opened in the red in morning trade with consumer discretionary leading the downturn. Pizza restaurant chain Domino’s Pizza share price took a 19 per cent hit after a company’s profits were down 28.3 per cent to $63.9 million for the December half, prompting it to cut its dividend. Its share price was down 19.53 per cent to $57.42 in morning trade.

Origin Energy was the best performer in morning trade with its share price jumping 13.27 per cent to $7.94 after its two North American suitors submitted a revised bid for the energy giant, raising hopes a deal will be done.

BHP was the only big miner opening trade in the green with small gains. Rio Tinto’s share price dipped in the red ahead of the release of its results later today and Fortescue fell by 2 per cent to $22.83.

New Zealand’s biggest telco Spark New Zealand’s share price fell by 6.51 per cent, while the REA group and Xero were also down, 2.22 and 1.80 per cent, respectively.

Utilities was the only sector in the green, up 4.68 per cent. The Woolworths Group enjoyed a 2.56 per cent bump in it share price as earnings the company reported a net profit after tax before significant items of $907 million, a jump of 14 per cent. Earnings before interest and tax for the period came in 18.4 per cent higher to $1.6 billion.

The S&P 500 fell 2 per cent for its sharpest drop since the market was selling off in December. The Dow Jones Industrial Average lost 697 points, or 2.1 per cent, while the Nasdaq composite sank 2.5 per cent.

Rates and stock prices are high enough that strategists at Morgan Stanley say US stocks look to be more expensive than at any time since 2007.

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The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, leaped further to 3.95 per cent from 3.82 per cent late Friday. The two-year yield, which moves more on expectations for the Fed, rose to 4.72 per cent from 4.62 per cent. It’s close to its highest level since 2007.

“That is what’s weighing on the market,” said Keith Lerner, chief market strategist at Truist Advisory Services.

Yields have shot higher this month as Wall Street ups its forecasts for how high the Federal Reserve will take short-term interest rates in its efforts to stamp out inflation. The Fed has already pulled its key overnight rate up to a range of 4.50 per cent to 4.75 per cent, up from basically zero at the start of last year.

Several reports have come in recently to show the economy remains stronger than expected. Those allay fears that the economy may soon fall into a recession, which is a positive for the market. But on the negative side, they could also fuel upward pressure on inflation and give the Fed more reason to stick to the “higher for longer” campaign it’s been espousing for rates.

The latest evidence came from a preliminary report Tuesday that suggested business activity is gaining momentum. The services industry likely returned to growth last month and was at an eight-month high, according to S&P Global. Manufacturing, meanwhile, may still be contracting, but the reading hit a four-month high.

Such strength has caused the more pessimistic investors on Wall Street to keep their forecasts for a recession but move its timing later into the year.

With AP

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Source: Thanks smh.com