Source : THE AGE NEWS
By Stan Choe
US stocks are drifting following a jumble of mixed reports that shed little clarity on how the US economy is managing through President Donald Trump’s trade war.
The S&P 500 was 0.3 per cent higher in afternoon trading after erasing a modest, earlier loss that had it on track for its first drop of the week. The Dow Jones was up 175 points, or 0.4 per cent in mid-afternoon trade and the Nasdaq composite was 0.2 per cent lower.
Wall Street has had another day of choppy trade.Credit: AP
The Australian sharemarket is set to jump, with futures at 4.53am AEST pointing to a rise of 73 points, or 0.9 per cent, at the open. The ASX added 0.2 per cent on Thursday for its seventh-straight positive session. The Australian dollar was 0.4 per cent lower at 64.01 US cents at 5am AEST.
Treasury yields sank in the bond market following the reports, with the headliners saying shoppers spent less at US retailers last month than expected, while inflation was better at the wholesale level than economists expected. Other updates said US manufacturing looks like it’s still contracting but fewer US workers are applying for unemployment benefits than expected.
Altogether, the reports suggested the Federal Reserve may have more room to cut interest rates later this year to bolster the US economy if it weakens under the weight of high tariffs. But they did little to spell out whether the economy is falling toward a recession, as many investors had been fearing, or shaking off the uncertainty after Trump called off many of his tariffs temporarily.
Even though China and the United States recently agreed on a 90-day stand-down for many of their tariffs, “the trade story isn’t over, and it’s still going to take time for tariffs to make themselves felt in economic data,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
Such uncertainty showed itself in Walmart’s stock, which fell 1.1 per cent even though it reported a bigger profit for the latest quarter than analysts expected.
Like other US companies struggling through Trump’s on-again-off-again rollout of tariffs, Walmart said it decided not to offer a forecast for how much profit it will make in the current quarter. Chief financial officer John David Rainey pointed to “the range of near-term outcomes being exceedingly wide and difficult to predict,” though the company did say it expects sales to grow between 3.5 per cent and 4.5 per cent, not including the swings that shifting values of foreign currencies can bring.
The nation’s largest retailer also said that it must raise prices due to higher costs caused by Trump’s tariffs.
Equipment maker Deere also said it’s seeing “near-term market challenges” and called the situation “dynamic,” as many other companies have. It lowered the bottom end of its forecasted range of profit for the full year. But its stock nevertheless rose 3.3 per cent after it reported a stronger profit for the latest quarter than analysts expected.
Cisco Systems was another winner and jumped 4.6 per cent after the tech giant likewise topped expectations for profit. Analysts said they’re optimistic about Cisco’s artificial-intelligence prospects, and it was one of the strongest forces pushing upward on the S&P 500.
Elsewhere on Wall Street, Dick’s Sporting Goods tumbled 14.9 per cent after it said it would buy the struggling Foot Locker chain for $US2.4 billion ($3.8 billion). Dick’s also said that it made a better profit for the latest quarter than analysts expected.
Foot Locker soared 84.3 per cent after coming into the day with a loss of nearly 41 per cent for the year so far.
It’s the second buyout of a major footwear company in as many weeks as businesses struggle with uncertainty over how Trump’s tariffs will impact imported products coming from overseas. Last week Skechers announced that it was being taken private by 3G Capital for $US9 billion.
In the oil market, crude prices sank 2.5 per cent on expectations that more petroleum could be set to flow into global markets because of a possible deal between the United States and Iran over that country’s nuclear program. Such a deal could help ease sanctions against Iran, which is a major producer of oil.
Elsewhere, China moved to reverse some of its “non-tariff” measures against the US as agreed with Washington in their temporary trade war truce, while demanding that the US side “immediately correct its wrong practices.”
A Chinese Commerce Ministry spokesperson accused the Trump administration of violating world trade rules by announcing that use of Ascend computer chips made by China’s Huawei Technologies violates US export controls.
Stock indexes fell 0.8 per cent in Hong Kong and 0.7 per cent in Shanghai, while indexes were mixed elsewhere in Asia and Europe.
In the bond market, the yield on the 10-year Treasury fell to 4.46 per cent from 4.53 per cent late Wednesday.
The two-year Treasury yield, which more closely tracks expectations for Fed action, dropped to 3.97 per cent from 4.05 per cent. Traders are building bets that the Fed will resume cutting its main interest rate as soon as September.
The Fed has been keeping its main interest rate on hold this year as it waits to see how Trump’s trade policies play out for the economy. Cutting interest rates would help juice the economy by making it easier for US households and companies to borrow and spend. But it would also push upward on inflation when worries are high that Trump’s tariffs will do the same thing.
Fed Chair Jerome Powell warned in a speech on Thursday that the world “may be entering a period of more frequent, and potentially more persistent, supply shocks” that could goose inflation higher and present a “difficult challenge for the economy and for central banks.”
