Wall Street seesaws as oil prices swing; ASX set to rise
Stan Choe
Hourly fluctuations in oil prices continue to rattle financial markets and U.S. stocks are surging after the latest reversal.
The S&P 500 rose 0.2 percent, approaching an all-time high last week. The Dow Jones rose 351 points (0.7 percent), while the Nasdaq composite rose 0.2 percent. The Australian share market is poised to rise, with futures pointing to a 20-point, or 0.2 per cent, rise at the open at 4.59am AEST. The ASX rose 1.5 per cent on Thursday. The Australian dollar was trading at 71.49¢.
All three indexes erased early declines and gained strength following the recent U-turn in oil prices. Brent crude briefly rose above $109 a barrel in the morning, threatening to worsen the world’s already high inflation, before quickly erasing all gains in midday trading, falling 2 percent to $102.93.
Oil prices are on the rise due to uncertainty about how long the war with Iran will keep the Strait of Hormuz closed. The closure prevented oil tankers from leaving the Persian Gulf to distribute crude oil to customers around the world, driving up oil prices.
As oil prices fell on Thursday, the pressure on Wall Street due to the bond market also increased.
Yields have risen so high that they threaten to slow economies around the world and drive down the prices of stocks, Bitcoin and every other investment. They have pushed the average long-term U.S. mortgage rate to its most expensive level since last summer and may restrict companies from borrowing to build the AI data centers that have recently fueled growth of the U.S. economy.
The yield on the 10-year Treasury bond briefly approached 4.63 percent in the morning hours, then fell to 4.55 percent following the mid-day rise in oil prices. This is down from 4.57 percent at the end of Wednesday and 4.67 percent the day before.
Among the biggest beneficiaries of lower returns may be the smallest companies, many of which need to borrow to grow. The Russell 2000 index of smallest U.S. stocks rose 1.2 percent, far more than the rest of the market.
Due to the easing of oil prices, the shares of companies with high fuel bills also rose. Southwest Airlines rose 2.8 percent and American Airlines flew 3.6 percent higher.
Ralph Lauren rose 15 percent in the latest quarter after a stronger profit and revenue report than analysts expected.
They helped offset a 1.5 percent decline for Nvidia, one of Wall Street’s most influential stocks due to its massive size.
The chip company reported stronger profits and revenue than analysts expected in its latest quarter, and also forecast revenue for the current quarter that met analysts’ forecasts. “The construction of AI factories, the largest infrastructure expansion in human history, is accelerating at a phenomenal rate,” said CEO Jensen Huang.
But such performances and such talk became routine, and Nvidia’s shares swung between losses and gains before falling.
Some analysts said the weakness could be due to investors locking in profits after Nvidia’s shares rose nearly 70 percent from the previous year, more than double the S&P 500’s 27 percent gain. The broader AI industry has faced criticism for being too expensive and too cyclical, with Nvidia buying ownership stakes in companies using its chips that boost its revenue.
Walmart also fell 6.8 percent following its earnings report. The retailer delivered another quarter of impressive revenue but offered weaker forecasts for upcoming profit than analysts expected.
Walmart has resonated with Americans who are increasingly cautious about where they spend their money and disheartened about the economy as inflation takes a bigger bite out of their paychecks.
A preliminary report on business activity in the US has suggested that companies are also feeling the pain of high inflation.
A flash survey from S&P Global found that growth in activity at U.S. service businesses unexpectedly slowed slightly, but growth was better than forecast for U.S. manufacturers.
“The damaging economic impact of the war in the Middle East is becoming increasingly evident in business surveys,” according to Chris Williamson, chief business economist at S&P Global Market Intelligence.
Meanwhile, a separate report gave the latest signal that the U.S. labor market is in better shape than economists expected. The number of U.S. workers applying for unemployment benefits unexpectedly decreased last week, indicating fewer layoffs.
In foreign stock markets, indices in Europe were mixed following the big moves in Asia.
Kospi in South Korea gained 8.4 percent thanks to the strength in technology stocks. Samsung Electronics rose 8.5 percent after its labor union and management reached an agreement late Wednesday that averted a strike. Chip company SK Hynix, which partners with Nvidia, rose 11.2 percent.
While the Tokyo Nikkei 225 index rose 3.1 percent, the indices fell 1 percent in Hong Kong and 2 percent in Shanghai.
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