ASX set to edge up as Wall Street eyes milestone

By Stan Choe
Updated

The S&P 500 is on the cusp of reaching the 5000 level for the first time as Ford Motor, Chipotle Mexican Grill and other big stocks climbed following their latest earnings reports.

The S&P 500 closed 0.8 per cent higher at 4995, having moved as high as a fraction of a point away from its latest milestone. The Dow Jones added 0.4 per cent and the Nasdaq composite was up 1 per cent. The Australian sharemarket is set inch higher, with futures pointing to a gain of 3 points, at the open. The ASX added 0.5 per cent on Wednesday.

Wall Street was higher across the board on the back of a raft of strong earnings.
Wall Street was higher across the board on the back of a raft of strong earnings. Credit: Bloomberg

A relatively calm day in the bond market helped keep things smooth for the stock market, despite some concerns about investors’ ability to digest a $US42 trillion ($64.4 trillion) auction of 10-year Treasurys by the US government.

Underneath the surface, though, were still some very sharp moves. New York Community Bancorp went from an initial gain to a steep loss of 14 per cent and back to a gain of 6.7 per cent. It’s the latest dizzying swing for the bank, which is still down nearly 60 per cent since rattling investors across the industry last week with a surprise loss.

It’s struggling with challenges related to its acquisition of Signature Bank, which was one of the banks that collapsed in last year’s mini-crisis for the industry. But New York Community Bancorp is also feeling pain from a problem dogging banks worldwide: weakness in commercial real estate.

Moody’s downgraded the bank’s credit rating late Wednesday to “junk” status from the lowest tier of investment-grade. Analysts also said they were concerned about the departures of key risk and audit executives for the bank.

New York Community Bancorp’s stock then went on a wild ride in off-hours trading, sinking and then rising after the bank said it had increased its deposits and gave details about how much cash it has on hand.

Stocks of other regional banks have been caught up in the drama, to a lesser degree, which has brought back uncomfortable memories of last year’s banking crisis. The KBW Nasdaq Regional Banking index swung from a loss during the day to a gain of 0.1 per cent.

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UBS analyst Brody Preston said New York Community Bancorp’s latest quarterly loss and dividend cut are due to problems related specifically to it and “are not necessarily a proverbial canary in the coal mine for other banks in the space.” But attention is likely to remain on potential losses for banks tied to commercial real estate, particularly after Treasury Secretary Janet Yellen recently highlighted them as a concern.

Elsewhere on Wall Street, Chipotle Mexican Grill rose 7.2 per cent after reporting stronger profit and revenue for the latest quarter than analysts expected. Its restaurants sold more meals to customers than they did a year earlier.

CVS Health gained 3.1 per cent after it likewise topped expectations for both profit and revenue in the final three months of 2023. The drugstore chain and pharmacy benefits manager, though, also trimmed its forecast for full-year results.

Ford Motor climbed 6.1 per cent following its better-than-expected results, while Enphase Energy soared 16.9 per cent despite falling just shy of forecasts. Investors are hopeful that weakness in demand for the supplier of solar and battery systems is nearing a bottom.

They helped offset a 9.7 per cent drop for VF Corp., the company behind Vans, The North Face and other brands. It reported weaker results than analysts expected.

Snap tumbled 35.2 per cent after its fourth-quarter revenue fell short of analysts’ expectations. The company behind Snapchat also gave a tepid forecast for 2024 after saying on Monday that it was laying off 10 per cent of its workforce.

Wall Street was also trying to game out potential impacts from an announcement that ESPN, Fox and Warner Bros. Discovery are planning to launch a streaming platform for sports. Many details are still to be worked out, as is how it will impact prices for broadcasting rights with sports leagues. But fuboTV, a streaming service that offers sports, fell 22.7 per cent.

In the bond market, Treasury yields were holding relatively steady. The yield on the 10-year Treasury edged up to 4.10 per cent from 4.09 per cent late Tuesday. It’s been on a jagged run recently as signals of a remarkably resilient economy force traders to push back forecasts for when the Federal Reserve may cut interest rates.

While a delay in rate cuts hurts the stock market, strong economic data also carry an upside for investors. They should mean stronger profits for companies. Those hopes have helped stocks build on their big rally, which began in October initially with hopes that inflation had cooled enough for the Fed to consider cutting rates.

In stock markets abroad, indexes were modestly lower in Europe and mixed in Asia.

Stocks rose 1.4 per cent in Shanghai but slipped 0.3 per cent in Hong Kong following moves this week by authorities to prop up what have been some of the world’s worst-performing markets this year.

AP

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Source: Thanks smh.com