Healthcare firms and banks lift the ASX despite drop on Wall Street

By Millie Muroi
Updated

Healthcare companies and banks lifted the Australian sharemarket on Friday despite a negative lead from Wall Street where reports showed the US job market was stronger than expected, dampening the chance of rate cuts.

The S&P/ASX 200 rose 9.9 points, or 0.1 per cent, to 7504 at about 10.45am AEDT even as consumer discretionary and information technology firms traded firmly in the red. The Australian dollar was fetching 67.04 US cents, 0.04 per cent.

Healthcare companies and banks have lifted the Australian sharemarket.
Healthcare companies and banks have lifted the Australian sharemarket.Credit: Tamara Voninski

Coal miners Whitehaven (up 2.4 per cent) and Yancoal (up 1.4 per cent) were among the biggest large-cap advancers, helping to buoy the energy sector (up 0.1 per cent).

Healthcare firms including Resmed (up 2 per cent) and medical equipment provider EBOS Group (up 0.9 per cent) were also stronger, lifting the healthcare sector which added 0.7 per cent.

Financials (up 0.4 per cent) was also among the best-performing sectors as the big four banks and Macquarie (up 0.2 per cent) traded in the green. CBA added 0.7 per cent, NAB gained 0.1 per cent, Westpac advanced 0.1 per cent and ANZ climbed 0.04 per cent.

On the flip side, interest-rate sensitive sectors slipped lower.

Information technology companies (down 1 per cent) traded lower as WiseTech (down 1.5 per cent), Xero (down 1.5 per cent) and Altium (down 1.4 per cent) declined. Consumer discretionary companies were also weaker as Aristocrat Leisure (down 1.1 per cent), JB Hi-Fi (down 1.1 per cent) and Domino’s Pizza (down 1 per cent) weighed down the sector.

Meanwhile, Wall Street’s weak start to 2024 carried into a third day, and stocks finished mixed on Thursday following reports showing the US job market remains solid, though maybe a touch too strong.

The S&P 500 slipped 16.13, or 0.3 per cent, to 4688.68 and is on track for its first losing week in the last 10. The Dow Jones Industrial Average eked out a gain of 10.15 points, or less than 0.1 per cent, to 37,440.34, and the Nasdaq composite fell 81.91, or 0.6 per cent, to 14,510.30.

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Walgreens Boots Alliance sank 5.1 per cent after it nearly halved its dividend so it could hold on to more cash. That helped overshadow gains for airlines and cruise-ship operators, which recovered some of their sharp losses from earlier in the week. Carnival steamed 3.1 per cent higher, and United Airlines got a 2.4 per cent lift.

US stocks have broadly regressed this week after rallying nine straight weeks into the end of last year. Critics said the market was due for at least a breather following its big run, which fed on hopes that inflation has cooled enough for the Federal Reserve to cut interest rates sharply this year.

Rate cuts give a boost to prices for stocks and other investments, while also relaxing the pressure on the economy and financial system. Treasury yields in the bond market have already eased since autumn on hopes for such cuts, releasing pressure on the stock market.

But Treasury yields rose Thursday following a couple reports on the job market that were stronger than expected. The economy is in a delicate phase where investors want it to remain solid, but not too hot.

Too much strength in the job market could prod the Federal Reserve to keep interest rates high because it could keep upward pressure on inflation.

A healthy job market is of course good for workers and stamps out worries about an imminent recession. But too much strength could prod the Federal Reserve to keep interest rates high because it could keep upward pressure on inflation. And the Fed has already hiked its main interest rate to the highest level since 2001.

One report from the US government on Thursday showed fewer US workers filed for unemployment benefits last week than expected. Another from ADP Research Institute said private employers accelerated their hiring last month by more than economists expected.

A more comprehensive report on the jobs market from the US Labor Department will arrive on Friday. Economists expect that to show US hiring slowed to 160,000 jobs last month from 199,000 in November.

“If tomorrow’s numbers show the same kind of strength and the economy keeps rolling along, it’s fair to wonder why the Fed would be in a rush to cut rates,” said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley.

Traders are betting the Federal Reserve will cut interest rates by twice as much this year as the central bank has indicated. Wall Street is also thinking the first cut could come as soon as March, and a stronger-than-expected economy makes such predictions less realistic. Critics had already called them overly aggressive.

A third report from S&P Global said that growth for financial businesses and others in US services industries was a touch stronger last month than expected.

Following Thursday’s data reports, the yield on the 10-year Treasury rose to 3.99 per cent from 3.91 per cent late on Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for the Fed, climbed to 4.38 per cent from 4.33 per cent.

Stocks have already rallied in part on expectations for sharp cuts coming to interest rates soon. If the Fed doesn’t cut as deeply and as quickly as expected, prices for stocks and other investments could be in jeopardy.

On Wall Street, Peloton Interactive jumped 14.5 per cent after it announced a partnership to bring its workout content to TikTok.

APA fell 7 per cent after it said it will buy Callon Petroleum in an all-stock deal valued at roughly $US4.5 billion, including debt. Callon Petroleum gained 3.5 per cent.

In stock markets abroad, indexes were modestly higher in much of Europe and a bit lower in much of Asia.

In Tokyo, the mood was sombre as the market reopened from the New Year holidays with a moment of silence after a major earthquake Monday left at least 77 people dead and dozens missing.

Dark-suited officials bowed their heads in a ceremony that usually features women clad in colourful kimonos. Japan’s benchmark Nikkei 225 fell 0.5 per cent.

With AP

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Source: Thanks smh.com