Source : THE AGE NEWS
By Stan Choe
US stock indexes are drifting lower on Tuesday, as momentum slows for Wall Street after it rallied from a deep hole nearly all the way back to its all-time high set earlier this year.
The S&P 500 was down 0.3 per cent in afternoon trading but still within 3.2 per cent of its record. The Dow Jones was down 89 points, or 0.2 per cent and the Nasdaq composite was 0.3 per cent lower.
Wall Street drifted lower on Tuesday. Credit: AP
The Australian sharemarket is set to advance, with futures at 4.56am AEST pointing to a rise of 37 points, or 0.4 per cent, at the open. The ASX added 0.6 per cent on Tuesday after Reserve Bank reduced its benchmark interest rate by a quarter of percentage point for a second time this year.
The Australian dollar retreated. It was 0.7 per cent lower to 64.14 US cents at 5.12am AEST.
Treasury yields were also drifting in the bond market, while the value of the US dollar was relatively stable against other currencies following a brief jolt Monday morning after Moody’s Ratings said the US government no longer deserves a top-tier credit rating because of worries about its spiralling debt.
On Wall Street, Tesla was 0.1 per cent higher as CEO Elon Musk said he’s committed to still leading the carmaker five years from now and expects to pare back his political spending, assuaging some investors’ concerns about the future of his most valuable company.
Musk has been chief executive officer of Tesla since 2008, one of the longest active stints atop the world’s largest automakers. His level of engagement with the company has come under greater scrutiny as the carmaker has followed up its first annual sales drop in over a decade with steeper declines early this year.
Companies in the travel industry fell to some of the US stock market’s worst losses, as doubts continue about how much US households will be able to spend on vacations. Airbnb dropped 3.2 per cent, Norwegian Cruise Line fell 3.4 per cent and Las Vegas Sands lost 2.2 per cent.
On the winning side of Wall Street was D-Wave Quantum, which jumped 32.1 per cent after releasing its latest quantum computing system. The company says it can solve complex problems beyond the reach of classical computers.
Home Depot slipped 0.7 per cent after it reported better revenue than analysts expected for the start of the year, though its profit came up just short of forecasts. Perhaps more importantly for Wall Street, the home-improvement retailer also said it’s sticking with its forecasts for profit and sales growth over the full year.
That’s counter to a growing number of companies, which have recently said tariffs and uncertainty about the economy are making it difficult to guess what the upcoming year will bring. President Donald Trump has launched stiff tariffs against trading partners, only to delay or roll many of them back. Traders are hopeful that Trump will eventually lower his tariffs after reaching trade deals with other countries, but that’s not a certainty.
Target and Home Depot rival Lowe’s will report their latest results on Wednesday.
In the bond market, the yield on the 10-year Treasury rose to 4.48 per cent from 4.46 per cent late Monday. The two-year yield, which more closely tracks expectations for action by the Federal Reserve, edged down to 3.96 per cent from 3.97 per cent late Monday.
Concern still remains that Trump’s tariffs could push the US economy into a recession, even if it’s held up OK for the time being. If a recession does happen, the US government may have less room to offer support for the economy through big spending plans or direct stimulus checks to households than in prior downturns. That’s because the US government’s debt is so much higher now, and it could be set to get even bigger with Washington debating more cuts to taxes.
If the US government can’t offer as much fiscal support for the economy, that could make the next recession deeper and last longer, according to James Egelhof, chief US economist and other strategists at BNP Paribas. That could put more pressure on the Federal Reserve to prop up the economy by itself through lower interest rates.
Other central banks around the world have already begun cutting interest rates.
China’s central bank made its first cut to its loan prime rates in seven months in a move welcomed by investors eager for more stimulus as the world’s second-largest economy feels the pinch of Trump’s higher tariffs. Tuesday’s cuts probably won’t be the last this year, Zichun Huang of Capital Economics said in a report.
Following the cuts, stock indexes rose across much of the world. Hong Kong’s Hang Seng jumped 1.5 per cent for one of the bigger gains.
Shares in China’s CATL, the world’s largest maker of electric batteries, jumped 16.4 per cent in its Hong Kong trading debut after it raised about $US4.6 billion in the world’s largest IPO this year. Its shares traded in Shenzhen, mainland China’s smaller share market after Shanghai, gained 1.2 per cent after dipping earlier in the day.
AP
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