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ASX set to slide as Wall Street wavers
By Damian Troise and Alex Veiga
Stocks closed lower on Wall Street after a big jump last week on hopes for interest rate cuts from the Federal Reserve.
The S&P 500 fell 0.4 per cent on Monday. The Dow Jones gave back 0.8 per cent after setting a record on Friday. Tech stocks did better than the rest of the market, leaving the Nasdaq composite down just 0.2 per cent.
Wall Street has made an unsteady start to the week. Credit: Bloomberg
The Australian sharemarket is set to retreat, with futures at 6.06am AEST pointing to a fall of 30 points or 0.3 per cent, at the open. The ASX edged up by 0.1 per cent on Monday. Reporting season continues with Fortescue and Coles among companies due up. The Australian dollar was 0.2 per cent lower to US64.80¢ at 5.15am.
Gains for several big technology stocks helped offset broader losses on Wall Street. Alphabet, Google’s parent company, rose 1.8 per cent. Technology heavyweight Nvidia rose 1.8 per cent.
Keurig Dr Pepper sank 9.6 per cent after saying it will buy Peet’s Coffee owner JDE Peet’s in a deal worth about $US18 billion ($27.8 billion).
Railroad stocks fell following a report that Warren Buffett informed CSX management that he is not looking to buy the railroad. Shares in CSX fell 4.6 per cent. Union Pacific slipped 1.9 per cent and Norfolk Southern was 2.3 per cent lower.
Treasury yields rose in the bond market following their big drop on Friday amid expectations that the Fed will cut its benchmark interest rate in September.
The yield on the 10-year Treasury rose to 4.27 per cent from 4.25 per cent late Friday. The two-year Treasury yield rose to 3.73 per cent from 3.70 per cent late Friday.
European markets were mostly lower and Asian markets closed lower overnight.
Wall Street is still overwhelmingly betting that the Fed will cut interest rates at its next meeting in September. Traders see an 86 per cent chance that the central bank will trim its benchmark rate by a quarter of a percentage point, according to data from CME Group.
The Fed has been maintaining rates at their current level since the end of 2024 amid worries about inflation heating up as tariffs work their way through the economy to businesses and households.
The central bank has grown increasingly concerned about the state of the job market in the US Its two main focuses are keeping inflation low and supporting conditions for strong employment.
Recent signals have show that the job market is seemingly stagnating and could possibly weaken, which could prompt the central bank to cut rates. Lower interest rates make borrowing easier, helping to spur more investment and spending, but that could also potentially fuel inflation.
So far, consumer confidence remains mostly solid, though concerns about inflation linger. Wall Street and the Fed will get an update on consumer confidence in the US when business group The Conference Board releases its monthly survey for August on Tuesday. Economists expect overall confidence to remain mostly unchanged from July.
The bigger update will come on Friday, when the government releases an inflation report that is closely monitored by the Fed. An update on inflation earlier in August showed that consumer prices remained modestly higher in July, compared with a year ago. The government’s report on Friday, the personal consumption expenditures price index, is expected to show a similar result.
Economists expect the PCE to show that prices rose 2.6 per cent in July, compared with a year ago. That’s unchanged from the rate in June and hovering just above the Fed’s preferred target of 2 per cent.
Wall Street has a few more corporate earnings updates this week, essentially wrapping up the latest round of profit reports and forecasts from US companies.
Nvidia will report its latest results on Wednesday. The company’s role as a key supplier of chips for artificial intelligence and its heavy weighting give it outsized influence as a bellwether for the broader market. It has been a driving force for much of the market’s gains, along with several other tech giants with pricey stock values.
On Thursday, Wall Street will get earnings updates from electronics retailer Best Buy and discount retailer Dollar General. Retailers are being closely watched as Wall Street tries to gauge the current and potential future impact on costs and prices from tariffs.
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