By Millie Muroi
The Australian sharemarket climbed on the back of a positive lead from Wall Street where markets continue to expect rate cuts, with technology and consumer stocks leading the gains.
The S&P/ASX 200 rose 60.7 points, or 0.8 per cent, to 7481.9 at about 12.05pm AEDT as all sectors except miners and utilities traded in the green. The Australian dollar was fetching 66.1 US cents, up 0.2 per cent.
Information technology (up 1.4 per cent) was among the strongest sectors as Xero climbed 2.5 per cent, WiseTech added 1.4 per cent and Altium gained 1.4 per cent. Consumer discretionary firms (up 1.6 per cent) were also among the strongest performers with Harvey Norman (up 2.4 per cent), Aristocrat Leisure (up 2.6 per cent) and IDP Education (up 3.8 per cent) all stepping up. Consumer and tech stocks tend to benefit from expectations for rate cuts which encourage household spending and lower borrowing costs.
Car Group (up 2.8 per cent), Cochlear (up 2.3 per cent) and James Hardie Industries (up 2.1 per cent) also advanced.
Buy now, pay later outfit Zip was up 11.8 per cent at midday after it released a market update, reporting an 8.5 per cent jump in transaction volumes for the second quarter.
Mining companies (down 0.3 per cent) slipped lower as heavyweights Fortescue (down 0.3 per cent) and Rio Tinto (down 0.4 per cent) declined following a series of warnings from mining firms about challenging conditions and falling commodity prices. BHP (up 0.2 per cent) bucked the trend.
Mineral Resources (down 7.8 per cent), Pilbara Minerals (down 5.5 per cent) and IGO (down 4.4 per cent) were the biggest large-cap decliners.
Utilities (down 0.2 per cent) were also weaker as Origin lost 0.1 per cent, Meridian Energy dropped 2.9 per cent and Mercury Nz fell 3.7 per cent.
Elsewhere, Wall Street returned to record heights to cap a punishing, two-year round trip dogged by high inflation and worries about a recession that seemed inevitable but hasn’t arrived.
The S&P 500, which is the main measure that professional investors use to gauge Wall Street’s health, rallied 1.2 per cent to 4,839.81. It erased the last of its losses since setting its prior record of 4,796.56 at the start of 2022.
The Dow Jones gained 1.1 per cent and the Nasdaq composite jumped 1.7 per cent.
Friday’s lift for Wall Street came with a big boost from technology stocks, something that’s become typical in its run higher.
Several chip companies rose for a second straight day after heavyweight chipmaker Taiwan Semiconductor Manufacturing Co. delivered a better forecast for revenue this year than analysts expected. Broadcom rose 5.9 per cent, and Texas Instruments climbed 4 per cent.
Some encouraging data came Friday after a preliminary report from the University of Michigan suggested the mood among US consumers is roaring higher. It said sentiment jumped to its highest level since July 2021. That’s important because spending by consumers is the main driver of the economy.
After shooting higher as snarled supply chains caused shortages because of COVID-19 shutdowns, inflation has been cooling since its peak two summers ago. It’s eased so much that Wall Street’s biggest question now is when the Federal Reserve will begin moving interest rates lower.
Treasury yields have already relaxed significantly on expectations for rate cuts, and that helped the stock market’s rally accelerate sharply in November. The yield on the 10-year Treasury slipped Friday to 4.13 per cent, and it’s down sharply from the 5 per cent that it reached in October, which was its highest level since 2007.
Friday’s return of the S&P 500 to a record serves as another example that investors who stay patient and spread their investments across the US stock market end up making back all their losses. Sometimes it can take a long time, like the lost decade of 2000 through 2009 when the S&P 500 tumbled through the dot-com bubble bust and the global financial crisis. But the market has historically made investors whole again, given enough time.
Including dividends, investors with S&P 500 index funds already returned to break-even a month ago.
Of course, risks still remain for investors. Besides uncertainty about when the Fed will begin cutting interest rates, it’s also still not a sure thing that the economy will avoid a recession.
Hikes to interest rates take a notoriously long time to make their way fully through the system, and they can cause things to break in unexpected places within the financial system.
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Source: Thanks smh.com