Wall Street ddrifts, oil falls, Pizza Hut sold; ASX set for flat start
Stan Choe
Oil prices are falling again, falling below $80 a barrel for the first time since early March, while the U.S. stock market is nearing an all-time high.
The S&P 500 index fell 0.3 percent after a rally that brought it back to within 1 percent of the record it set earlier this month. The Dow Jones Industrial Average rose 431 points, or 0.8 percent, while the Nasdaq composite fell 0.6 percent.
The Australian share market is poised for a flat start, with futures pointing to a 1-point gain at the open at 4.59am AEST. The ASX rose slightly on Tuesday. The Australian dollar was trading at 70.73¢.
The barrel price of Brent crude oil fell 5.4 percent to $78.69 as optimism continued that an interim agreement on the US-Iran war would reopen the Strait of Hormuz at the weekend and restart global oil flows.
Significant obstacles remain in the negotiations, including what to do about Iran’s nuclear program. But the hope on Wall Street is that this deal will mean a long-term solution to the conflict that has worsened inflation around the world. The Brent price has fallen sharply from over $100 a few weeks ago, but it may take months for the energy sector to return to full swing.
Stocks benefiting from the boom in artificial intelligence technology on Wall Street were putting pressure on the market after sharp fluctuations in the last few weeks. They are driving the market up and down amid concerns that stock prices are rising too high and too fast due to the AI craze. Chip companies and other AI winners have grown so much that they have become Wall Street’s most influential stocks.
Nvidia’s 1.4 percent decline and Micron Technology’s 3.7 percent decline were among the most severe factors that dragged the S&P 500 down.
Robinhood Markets fell 1.4 percent after the investing platform said in a regulatory filing that it would lay off about 10 percent of its full-time employees, while Dave & Buster’s Entertainment lost 4.4 percent after reporting weaker profit than analysts expected in the latest quarter.
On Wall Street’s winning side was SpaceX, which gained 10.2 percent since its debut on the US stock market, making its third consecutive gain. It said it is moving forward with the acquisition of Cursor, a popular AI coding assistant, for US$60 billion ($84.8 billion).
Yum Brands rose 1.7 percent after announcing it would sell its Pizza Hut chain for $2.7 billion. Most of the restaurants will go to private equity firm LongRange Capital. Those in mainland China will go to Yum China Holdings.
In foreign stock markets, indices rose in Europe following the mixed performance in Asia.
Tokyo’s Nikkei 225 index briefly rose above 70,000 for the first time before closing with a modest 0.1 percent gain after the Bank of Japan raised its benchmark interest rate to 1 percent. This is the highest level in three decades and follows a similar move by the European Central Bank last week.
The Federal Reserve begins its own meeting on what to do about interest rates on Tuesday, and an announcement on the decision will be made on Wednesday.
This will be the first meeting under the Fed’s new chairman, Kevin Warsh, who was nominated by President Donald Trump. Trump is pushing for lower interest rates, which would stimulate the economy but also threaten to worsen inflation. However, the widespread expectation is that the Fed will leave the main interest rate alone again.
In the bond market, the yield on the 10-year Treasury note fell to 4.42 percent, from 4.47 percent late Monday and 4.56 percent earlier this month.
High yields in bond markets around the world resulting from expensive oil prices have threatened to slow economies and drive down the prices of all kinds of investments, including stocks and cryptocurrencies. Higher yields have already pushed up mortgage rates, and a report on Tuesday said construction crews started building far fewer new homes in the U.S. in May than economists expected.
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