ASX surges higher after Wall Street rebound

By Millie Muroi
Updated

The Australian sharemarket jumped sharply at the open, advancing on the back of a bounce-back on Wall Street and a surge in information technology stocks.

The S&P/ASX 200 rose 94.3 points, or 1.3 per cent, to 7440.8 at about 10.20am AEDT as all sectors traded in positive territory, putting the local sharemarket firmly on track to break a five-session losing streak. The Australian dollar was 0.06 per cent higher, fetching 65.77 US cents.

Wall Street recorded its first winning session of the week.
Wall Street recorded its first winning session of the week.Credit: Reuters

Interest-rate sensitive sectors were the strongest on the index. Altium (up 2.3 per cent) and WiseTech (up 2.2 per cent) were among the biggest large-cap advancers, helping to lift the information technology sector (up 2 per cent) which led gains on the local bourse.

Consumer discretionary companies (up 1.8 per cent) were also stronger as Aristocrat Leisure added 2.1 per cent and Domino’s Pizza gained 2 per cent. Yancoal (up 8 per cent) stepped up along with Whitehaven Coal (up 4.4 per cent) which said it was on track to meet full-year coal production guidance despite facing geological and train derailment challenges.

Safehaven companies including utilities firms (up 0.3 per cent) were among the weakest on the local bourse with Mercury Nz (down 2.3 per cent), Meridian (down 0.2 per cent) and Origin (down 0.1 per cent) among the biggest large-cap decliners.

Gold player Newmont (down 0.2 per cent) and healthcare equipment supplier EBOS Group (down 0.3 per cent) were also weaker.

Elsewhere, Wall Street bounced back to recoup almost all the losses it suffered earlier in the week as pressure easeD from the bond market.

The S&P 500 closed 0.9 per cent higher. The Dow Jones gained 0.5 per cent and the Nasdaq composite was 0.8 per cent higher.

Big Tech stocks led the way, including a 3.3 per cent climb for Apple. Fastenal jumped 7.2 per cent for the biggest gain in the S&P 500 after the distributor of safety supplies, fasteners and other products reported a bigger quarterly profit than analysts expected. They helped offset a warning from Humana about how higher costs would eat into its profit. The insurer tumbled 8 per cent.

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Stocks were broadly steadier as Treasury yields in the bond market slowed their jump from earlier in the week. Yields had been climbing as traders pushed back their forecasts for how soon the Federal Reserve will begin cutting interest rates. Higher yields in turn undercut prices for stocks and raise the pressure on the economy.

The Fed has indicated it will likely cut rates several times in 2024 because inflation has been cooling since its peak two summers ago, meaning it may not need as tight a leash on the economy and financial system. But critics said Wall Street’s expectations went overboard in how many cuts the Fed would deliver this year and how soon it would begin. That in turn may have sent stock prices too high and Treasury yields too low since their big moves began last autumn.

The yield on the 10-year Treasury rose to 4.15 per cent from 4.11 per cent late on Wednesday (US time). It had begun the week at 3.95 per cent.

The yield on the two-year Treasury, which moves more on expectations for Fed action, eased to 4.34 per cent from 4.36 per cent. But even there was hesitation.

Treasury yields swung up and down in the minutes after a report on Thursday morning showed the number of US workers applying for unemployment benefits fell last week to its lowest level since two Septembers ago. That’s good news for workers and for the economy overall, which has so far powered through predictions for a recession.

But a stronger-than-expected job market could also keep upward pressure on inflation. That would lessen the chances of the Federal Reserve cutting rates as soon as its March meeting. Traders are now betting on a roughly 57 per cent chance of that, down from more than 70 per cent a week ago, according to data from CME Group.

“The story this week continues to be robust economic data, and how it may keep rate cuts on ice for a while,” said Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley.

Other reports on the economy were mixed ON Thursday. One showed manufacturing in the mid-Atlantic region is contracting by more than economists expected. Another said homebuilders broke ground on more projects last month than economists expected, even if it was weaker than November’s level.

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