ASX set to edge higher, Wall Street slips on inflation

By Stan Choe

Stocks slipped to send Wall Street to a rare losing week, just its second in the last 16.

The S&P 500 fell 0.5 per cent from its all-time high set a day earlier. The Dow Jones 0.4 per cent, and the Nasdaq composite sank 0.8 per cent. The Australian sharemarket is set to inch up, with futures pointing to a gain of 8 points, or 0.1 per cent.

Wall Street recorded a rare losing week.
Wall Street recorded a rare losing week. Credit: Bloomberg

A report in on US inflation at the wholesale level gave the latest reminder that the battle against rising prices still isn’t over. Prices rose more in January than economists expected, and the numbers followed a similar report from earlier in the week that showed living costs for US consumers climbed by more than forecast.

Treasury yields rose immediately after the report’s release, adding pressure onto the stock market.

The data kept the door closed on hopes that the Federal Reserve could begin cutting interest rates in March, as traders had earlier hoped. It also discouraged bets that a Fed move to relax conditions on the economy and financial markets could come even in May.

The yield on the 10-year Treasury climbed to 4.28 per cent from 4.24 per cent late Thursday. The two-year Treasury yield, which more closely tracks expectations for the Fed, touched its highest level since December.

Higher rates and yields make borrowing more expensive, which puts the brakes on the economy and hurts prices for investments.

Still, the recalibrated bets for cuts to rates have simply brought Wall Street’s forecasts closer to what the Federal Reserve has been outlining. Critics have been saying traders’ expectations had gone overboard in how quickly and how much the Fed could cut rates in 2024.

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The wide expectation for the Fed’s next move is still for a cut to its main interest rate, which is at its highest level since 2001, as it’s said it likely will do.

“Markets are likely to take a well-deserved breather following a staggering rally since October, though the lack of emotional reaction to elevated inflation readings and shifting Fed expectations reflect the optimism of investors,” said Mark Hackett, Nationwide’s chief of investment research,

In the meantime, the hope is that the economy continues to remain solid despite the challenge of high interest rates.

A preliminary report on Thursday suggested that sentiment among US consumers is rising, though not by quite as much as economists hoped. That’s key because spending by consumers makes up the bulk of the economy.

In one potentially discouraging signal, the report from the University of Michigan also said that expectations for inflation in the coming 12 months ticked up to 3 per cent in February from 2.9 per cent in January.

If the economy does remain resilient, it would allow companies to deliver growth in profits, which can prop up stock prices.

Applied Materials climbed 6.3 per cent after it reported stronger profit for the latest quarter than analysts expected. The company designs and manufactures systems used to fabricate semiconductor chips, and it’s benefiting from the frenzy underway for artificial-intelligence technology.

Cryptocurrency company Coinbase Global leaped 8.8 per cent after it reported much better results for the latest quarter than forecast. Higher crypto prices helped drive more transaction revenue for the company.

On the losing end was Digital Realty, which sank 8.3 per cent. The owner of data centres reported weaker results than expected.

All told, the S&P 500 fell 24.16 points to 5,005.57. The Dow Jones dropped 145.13 to 38,627.99, and the Nasdaq composite sank 130.52 to 15,775.65.

In stock markets abroad, indexes climbed across much of Europe and Asia.

In Japan, Tokyo’s Nikkei 225 rose 0.9 per cent and got closer to its record high set at the end of 1989. That was just before Japan’s “bubble” economy burst as stock and real-estate prices plunged.

Japanese stocks have been rising recently even though its economy has shrunk to become the world’s fourth-largest.

AP

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Source: Thanks smh.com