ASX set to fall as Wall Street retreats from records
Stan Choe
While the U.S. stock market is trading just below records, oil prices continue to fall on hopes that a deal is nearing that would allow tankers to once again carry crude oil from the Persian Gulf to customers.
On Wall Street, the S&P 500 fell 0.5 percent from its all-time high the previous day, while the Dow Jones fell 328 points, or 0.6 percent, and the Nasdaq composite fell 0.3 percent from its own record. The Australian share market is poised for a sharp decline, with futures pointing to a loss of 137 points, or 1.5 per cent, at the open at 4.59am (AEST). The ASX gained 1 per cent on Thursday. The Australian dollar was trading at 72.29¢.
The barrel price of Brent crude oil, the international standard, fell by 0.5 percent to $100.71 from $115 at the beginning of this week. That and gasoline are still much more expensive than before the war with Iran began, but hope is rising in financial markets after Iran said it was reviewing recent U.S. proposals to end the war.
Of course, Wall Street had rallied strongly before, hoping for an end to the war with Iran, but was quickly disappointed. The same situation could happen again, and tensions remain high in the Middle East on Wednesday after a US warplane struck the rudder of an Iranian oil tanker in the Gulf of Oman as it attempted to bypass a US embargo on Iranian ports.
Despite all this uncertainty, a strong parade of U.S. companies saying they made more profits than analysts expected in the first three months of the year helped support the U.S. stock market. Stock prices tend to follow the path of corporate profits over the long term.
Datadog jumped 28.2 percent to lead the U.S. market after its monitoring and security platform for cloud applications beat analysts’ profit expectations in the latest quarter.
Albemarle rose 5.7 percent after its lithium products and specialty chemicals company also reported better-than-expected results. Taser maker Axon Enterprise rallied 10.7 percent after raising its revenue forecast this year, due in part to big growth in counter-drone products.
They helped offset a 13.2 percent decline for Whirlpool, which fell after reporting much weaker results than analysts expected. The company announced the biggest price increase of the last decade on major home appliances in North America, while accelerating cost cuts as U.S. consumers lost confidence.
Shake Shack fell 29 percent after its latest quarterly results fell well below analysts’ expectations.
McDonald’s revenue in the latest quarter was mostly unchanged, although it beat analysts’ expectations. CEO Chris Kempczinski said high gas prices and consumer concerns about the Iran war could hurt sales this spring.
In the bond market, Treasury yields have remained relatively stable. The yield on the 10-year Treasury note rose to 4.39 percent from 4.36 percent at the end of Wednesday, but remained below 4.45 percent earlier this week.
Lower yields could reduce rates for mortgages and other types of loans to U.S. households and businesses, providing a boost to the economy. Low returns also tend to push up the prices of stocks and other types of investments.
But the 10-year Treasury yield remains well above its pre-war level of 3.97 percent.
Various reports on the US economy were also mixed. More U.S. workers applied for unemployment benefits last week, but the increase was not as bad as economists expected, one said. Another report suggested that productivity of U.S. workers rose only half as much in the last quarter as economists expected.
Indices in foreign stock markets fell in Europe after the strong closing in Asia.
Japan’s Nikkei 225 index rose 5.6 percent as trading in Tokyo reopened after a holiday, matching big gains in Asian markets earlier in the week. The strength of tech stocks, which are benefiting from the boom in artificial intelligence, has reached a record high after rising almost 71 percent in the last 12 months.
“I think it’s a bubble of sorts because the buying activity is concentrated on leading AI, AI stocks and semiconductor-related stocks. This is a situation where only semiconductor stocks are being bought,” said Takashi Hiroki, chief strategist at MONEX.
