Wall Street wavers; Oil prices fall, ASX set to slide
Damian Troise
Stocks fluctuated in afternoon trading on Wall Street as major technology stocks posted losses and weighed on the broader market.
The S&P 500 fell 0.1 percent. The Dow Jones rose 165 points, or 0.3 percent, in afternoon trading. The Nasdaq composite fell 0.4 percent. The Australian share market is poised for a decline, with futures pointing to a decline of 33 points, or 0.4 per cent, at the open at 4.55am (AEST). The ASX rose 0.2 per cent on Wednesday. The Australian dollar was trading at 68.84¢.
Wall Street’s technology stocks started the day higher, helping support the market’s broader gains as pressure from falling bond yields and falling oil prices eased. But the influential tech sector is losing ground for the third day in a row. Big Tech companies, especially those focused on artificial intelligence, have expensive valuations that give them more say over the broader direction of the market.
Nvidia fell 1.2 percent, following a 4.1 percent drop on Tuesday. Micron Technology, which reports its final results later Wednesday, fell 3.6 percent, following a 13.2 percent drop on Tuesday. Microsoft fell 0.9 percent.
Google’s parent company Alphabet rose 0.8 percent. The company will replace Verizon in the Dow on Monday. Alphabet will be the fifth Magnificent 7 company to join the index. Others are Apple, Amazon, Microsoft and Nvidia.
Technology companies, especially those with a big focus on artificial intelligence, were behind Wall Street’s record-breaking run throughout the year. But analysts warned their valuations could be stretched.
“The next phase of the AI investment cycle is starting to clash with market discipline,” Jason Vaillancourt, chief portfolio strategist at Columbia Threadneedle, said in a research note.
Oil prices continued to fall as the United States and Iran negotiated a possible end to their war. Brent crude oil, the international standard, fell 3.6 percent to $74.02 per barrel. It has been trading below $80 in recent days but is still roughly above $70 per barrel, where it was trading in late February before the war began. US crude oil prices fell 3.8 percent to $70.46 per barrel.
Oil companies suffered some of the biggest losses. Exxon Mobil lost 2.3 percent and Chevron lost 2.4 percent.
Some of the biggest winners on Wall Street were home builders following the approval of legislation beneficial to the industry. KB Home rose 16.4 percent and DR Horton rose 6.5 percent.
Treasury yields have mostly fallen, taking some of the pressure off stocks. The yield on the 10-year Treasury note fell to 4.40 percent from 4.50 percent at the end of Tuesday. The yield of the 2-year Treasury bond decreased from 4.16 percent to 4.14 percent.
Treasury yields are still higher than they were at the beginning of the year, especially 2-year Treasury yields, which more closely track expected action from the Federal Reserve. The central bank has signaled that it is considering increasing the benchmark interest rate by the end of the year. According to data from CME Group, Wall Street predicts at least one interest rate increase by December.
The Fed is concerned about persistent inflation, which has risen throughout the year as tariffs have increased the costs of a wide range of goods. The shock in energy prices due to the US war with Iran worsened inflation. Gasoline prices have increased, transportation costs have increased. The impact is expected to continue even as oil and gasoline prices decline.
The central bank will get a new update on inflation on Thursday when its preferred measure of prices is announced. Economists expect the Personal Consumption Expenditures price index (PCE) to show prices rose 4.1 percent in May. This would be the highest level in three years.
“Thursday’s PCE is poised to take on greater significance for markets, especially as Federal Reserve Chairman (Kevin) Warsh insists on the central bank’s desire to maintain price stability at last week’s meeting,” Rick Gardner, chief investment officer at RGA Investments, wrote in a research note.
Gold prices are down 3.8 percent and are just under $4,000 per ounce. Gold was over $5,000 per ounce at the beginning of the year. The precious metal is often viewed as a barometer of risk appetite among investors; More is bought when anxiety increases, and more is sold as anxiety subsides.
Markets in Europe and Asia were mixed.
