ASX to open higher after Wall Street hits record
Stan Choe
Australia’s stock market will open higher on Monday after Wall Street broke records following a mixed report on the US jobs market; This report may delay the Fed from making another interest rate cut, but it does not close the door on this issue.
The S&P 500 rose 0.6 percent on Friday (US time), reaching the all-time high it set earlier in the week. The Dow Jones Industrial Average rose 237 points, or 0.5 percent, to a record high, while the Nasdaq composite led the market with a 0.8 percent gain.
Futures point to a 0.3 per cent rise in the S&P/ASX200 when trading begins on Monday, following flat performance on Friday. The Australian dollar was trading at 66.79¢ at 7.32am.
The moves came after the U.S. Labor Department said employers hired fewer workers in December than economists expected, but the unemployment rate improved and was better than expected. This reinforced how the U.S. job market may be in a “low-hiring, low-firing” state and hopefully avoid a recession.
On Wall Street, energy company Vistra gained 10.5 percent to lead the market after signing a 20-year deal to supply electricity to Meta Platforms from its three nuclear power plants. Big Tech companies are signing a series of such deals to mobilize data centers that strengthen their transition to AI technology.
Oklo rose 7.9 percent after it said it signed a deal with Meta Platforms that will help it secure nuclear fuel and advance its project to build a facility in Pike County, Ohio.
Homebuilders and other companies involved in the housing market were strong in early trading after President Donald Trump announced his plan to lower mortgage rates. Late Thursday, Trump called for US$200 billion ($299.4 billion) in mortgage bond purchases, similar to how the Fed has purchased mortgage-backed bonds in the past to lower mortgage rates.
Building products supplier Builders FirstSource rose 12 percent, along with Vistra for one of the biggest gains in the S&P 500. Among homebuilders, Lennar was up 8.9 percent, DR Horton was up 7.8 percent and PulteGroup was up 7.3 percent.
They helped offset General Motors’ 2.7 percent decline. The auto giant said it would take a US$6 billion hit to its results for the final three months of 2025 related to its withdrawal from electric vehicles. This is on top of the $1.6 billion charge GM took in the previous quarter. Fewer tax incentives and easier fuel emissions regulations are reducing demand for electric vehicles.
WD-40 fell 6.6 percent in the latest quarter following a weaker profit report than analysts expected. Finance chief Sara Hyzer said the soft numbers were primarily due to timing issues, not weak demand from end customers, and that the company stood by its financial forecasts for next year.
Overall, the S&P 500 rose 44.82 points to 6,966.28. The Dow Jones Industrial Average rose 237.96 to 49,504.07, and the Nasdaq composite index rose 191.33 to 23,671.35.
Treasury yields were mixed in the bond market.
The improvement in the US unemployment rate on Friday was enough for investors to pull back on expectations that the Fed would cut interest rates at its next meeting, scheduled for later this month. According to data from CME Group, traders predict that this probability will decrease to only 5 percent, from 11 percent the previous day.
But traders still expect the Fed to cut rates at least twice next year.
Whether these are true or not carries great risks for financial markets. Low interest rates can shake up the economy and increase investment prices, but they can also worsen inflation. And inflation has remained stubbornly above the Fed’s 2 percent target.
“A divided Fed will likely remain that way until data provides clearer direction,” according to Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Lower rates will likely come this year, but markets may need to be patient.”
A separate report released Friday morning suggested that sentiment among U.S. consumers is strengthening, especially among lower-income households. Perhaps more importantly for the Fed, the University of Michigan’s preliminary report stated that inflation expectations in the next 12 months may be at the lowest level in the last year. That could give him more freedom to lower interest rates.
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