Wall Street falls as bond markets turn up pressure, ASX set to slide
Stan Choe
Updated ,first published
The US stock market has given back most of its record-breaking rally as bond markets rattled by high inflation continue to add pressure.
The S&P 500 index fell 0.7 percent for the third consecutive month after hitting an all-time high. The Dow Jones Industrial Average fell 0.6 percent and the Nasdaq composite fell 0.8 percent. While the declines followed mixed movements in stock markets abroad, oil prices eased in the latest yo-yo move.
The Australian share market is poised for a decline, with futures at 4.54am (AEST) pointing to a loss of 29 points, or 0.3 per cent, at the open. The ASX gained 1.2 per cent on Tuesday. The Australian dollar was trading at 71.07¢.
Tech stocks are floundering after a massive sell-off driven by excitement over artificial intelligence technology, with critics saying they are too expensive. The stumble comes as oil prices are reeling from uncertainty about how long the Iran war will keep the Strait of Hormuz closed to oil tankers. This caused yields in bond markets to rise, which in turn negatively affected economies and every other type of financial market.
Meanwhile, the wait continues for Nvidia to announce its latest quarterly results. The chip company is due to report on Wednesday and routinely beats analysts’ expectations every quarter. Not only that, but it also provides future growth forecasts that are consistently above Wall Street.
How that happens will determine whether tech stocks and the broader U.S. stock market can continue their rally. Nvidia fell 0.7 percent.
“Every flow has a pullback,” Rex Feng, Venu Krishna and other strategists at Barclays Capital wrote in a report. They noted that investors were pumping more money than usual into U.S. stock funds, resulting in “the fastest recovery in decades; the pendulum may now swing back.”
Akamai Technologies fell 6.3 per cent, one of Wall Street’s sharpest losses, after the cybersecurity and cloud computing company said it wanted to raise US$2.6 billion ($3.7 billion) through a convertible bond offering.
Home Depot rose 0.9 percent after erasing an early loss following its latest earnings report. Its profit and revenue beat analysts’ expectations, but a key metric for retailers that examine the performance of stores more than 1 year old fell short of some analysts’ expectations.
CEO Ted Decker said Home Depot is seeing similar demand from customers as it has throughout the past year “despite greater consumer uncertainty and housing affordability pressures.”
So far, many major U.S. companies have reported stronger-than-expected profits in the latest quarter, thanks to customers continuing to spend despite high gas prices and other challenges.
In the bond market, Treasury yields rose further. The yield on the 10-year Treasury note rose to 4.65 percent at the end of Monday, from 4.61 percent and below 4 percent before the war with Iran began. That’s a significant increase and is part of a worldwide rally that makes stock prices look even more expensive and threatens to slow the economy.
Higher yields could increase mortgage and loan rates going to companies to build AI data centers, a major source of growth for the economy.
Yields have risen even as oil prices have fallen. The barrel price of Brent crude oil fell 1.5 percent to $110.42, but this price is still well above the $70 level before the war with Iran.
According to the AAA motor club, the average price of a gallon of gasoline rose again to $4.53 overnight; This is approximately 43 percent above the cost at this time last year.
In foreign exchanges, London’s FTSE 100 index remains almost flat despite Standard Chartered’s 2.2 percent decline. The bank said on Tuesday it plans to cut more than 7,800 roles as it accelerates their use of artificial intelligence and automation. It is the latest major company to cite artificial intelligence as one of the reasons for cutting jobs.
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