ASX stays red at lunchtime after Wall Street rally fizzles out

Medibank faces significant compensation claims if adverse findings emerge from an investigation by the Office of the Australian Information Commissioner (OAIC) and an independent report from Deloitte.

Wall Street wobbles

The gloomy start follows a wobbly trading day on Wall Street overnight, where stocks closed mostly higher. The S&P 500 rose 0.3 per cent after veering all the way from a 1.8 per cent gain earlier in the day to a 0.4 per cent loss. The Dow Jones posted a slight gain of 0.2 per cent, while strength for tech and high-growth stocks helped the Nasdaq composite do better than the rest of the market.

A day earlier, stocks fell sharply after the Federal Reserve indicated that while the end may be near for its market-rattling hikes to interest rates, it still doesn’t expect to cut rates this year. Markets lost momentum after Fed chair Jerome Powell said that, along with an insistence that it could keep raising rates if inflation stays high.

But traders on Thursday were still largely betting the Fed will cut rates later this year. Such cuts can act like steroids for markets, juicing prices for stocks, bonds and other investments. They would relax the pressure on the economy, but they could also give inflation more fuel.

Big technology and other high-growth stocks that tend to benefit the most from lower rates were leading the way on Wall Street. Nvidia rose 2.7 per cent, Microsoft gained 2 per cent and Apple climbed 0.7 per cent.

Some analysts were also saying comments from Treasury Secretary Janet Yellen that may have dragged down bank stocks on Tuesday weren’t much different from what she’s said before.

She said the government is not considering blanket protections for all customers at all banks, something that could have prevented the kinds of runs on banks that have already toppled two in the couple of weeks. That may have disappointed some investors hoping for a more comprehensive solution. But Yellen did say the government will make all depositors whole at banks on a case-by-case basis, when failing to do so would mean risk for the broader system.

Most stocks in the financial industry were up after falling a day before. But First Republic Bank, which has been at the centre of investors’ crosshairs the last couple of weeks because of the industry’s crisis, was yo-yoing. It closed 6 per cent lower after rising nearly 10 per cent in the morning.

The second- and third-largest US bank failures in history occurred earlier this month after customers at Silicon Valley Bank and Signature Bank rushed to pull out money all at once.

The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.

The Fed’s Powell said such fears were part of the reason the central bank raised rates by only a quarter of a percentage point on Wednesday instead of more. A pullback in lending could act almost like a rate hike on its own, he said.

In markets abroad, stocks in London slipped 0.6 per cent after the Bank of England also raised its key rate by a quarter of a percentage point. Stocks were mixed elsewhere across Europe and Asia.