ASX set to steady, Wall Street falls again
Many large investors still appear to be expecting stock prices to rise further, according to Bank of America Global Research’s latest monthly survey of global fund managers. But when asked what the No. 1 risk is for the market, 45 percent pointed to an AI bubble as it is less likely to happen but the likelihood of damage is huge. This leaves potential problems in the bond market, inflation and trade wars behind.
A record percentage of investors say companies are “overinvested,” according to the survey. The worry is that all the dollars pouring into AI chips and data centers around the world may not create the kind of revolution that AI advocates envision, or at least not as profitable.
Other high-flying areas of the market with their own evangelists have also been struggling of late. Bitcoin’s price fell below $90,000 in the morning hours, from around $125,000 last month. It later recouped some of its losses and rose above $93,000.
Home Depot also helped lead the market into decline after falling 4 percent. It reported weaker profit for the summer than analysts expected, citing several reasons. The most important of these was the absence of storms, which prompted customers to buy more home decor items. But CEO Ted Decker also pointed to “consumer uncertainty and ongoing pressure on housing” to prevent the expected increase in demand.
Reporting stronger earnings is one way to make a company’s stock price look cheaper because stock prices tend to move in line with earnings over the long term. This raises risks for Nvidia’s earnings report on Wednesday; This could help halt or worsen the decline in the stock.
Elsewhere on Wall Street, Cloudflare fell 2.4 percent after an earlier issue at the internet infrastructure provider led to global outages for ChatGPT and other services.
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In the bond market, Treasury yields declined. The yield on the 10-year Treasury note fell to 4.12 percent from 4.13 percent at the end of Monday.
The U.S. government reported that the number of workers applying for unemployment benefits in the week through Oct. 18 was roughly at the same level as a month earlier. However, data for the previous three weeks was not filled in. The government is starting to re-report labor market data and other signals about the economy after a six-week shutdown.
The lack of data has raised doubts about whether the Fed will cut its key interest rate at its next meeting in December; This was something investors had previously seen as very likely. What the Fed does is extremely important to the market because stock prices have reached records in part due to expectations that interest rate cuts will continue.
The Fed has already cut interest rates twice this year in hopes of supporting a slowing job market. But low interest rates could make inflation worse, and inflation has remained stubbornly above the Fed’s 2 percent target.
Indices in foreign stock markets fell across Europe and Asia.
Japan’s Nikkei 225 index fell 3.2 percent after feeling extra pressure from a rise in Japanese government bond yields; This reflects rising risks as Prime Minister Sanae Takaichi prepares to push back the timetable for increasing government spending and reducing Japan’s massive national debt.
South Korea’s Kospi index fell 3.3 percent and France’s CAC 40 index fell 1.9 percent, the two biggest declines worldwide.
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