Source : THE AGE NEWS

By Damian Troise
May 23, 2025 — 5.19am

Stocks are drifting on Wall Street following a rocky week so far because of worries coming out of the bond market about the US government’s debt.

The S&P 500 rose 0.3 per cent in afternoon trading, coming off a sharp loss that has it potentially heading for its worst week in the last seven. The Dow Jones was up 145 points, or 0.4 per cent, as of 1:50 p.m. Eastern time, and the Nasdaq composite was 0.7 per cent higher.

Wall Street has battled through an uncertain week.Credit: Bloomberg

The Australian sharemarket is set to rise, with futures at 5.01am AEST pointing to a rise of 36 points, or 0.4 per cent, ast the open. The ASX lost 0.5 per cent on Thursday. The Australian dollar declined. It was 0.3 per cent lower to 64.14 US cents at 5.15am AEST.

Technology stocks with outsized values that tend to sway the market up or down were doing most of the heavy lifting for the broader market. Google’s parent Alphabet jumped 2.4 per cent and Nvidia rose 1.3 per cent.

The choppy trading this week and sharp decline for stocks on Wednesday follows several weeks of mostly gains that have brought the S&P 500 back within 5 per cent of its all-time high.

“We’ve had a good bounce here, but the market is looking for some excuse to take some money off the table,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

Treasury yields were holding a bit steadier in the bond market, which has been the epicentre of Wall Street’s action this week, but only after several sharp swings in the morning. Yields have been on the rise in part because of worries about the US government’s spiralling debt.

The House of Representatives approved a bill early Thursday that would cut taxes and could add trillions of dollars to the US debt.

Besides making it more expensive for the US government to borrow to pay its bills, higher Treasury yields can also filter into the rest of the economy and make it tougher for US households and businesses to get their own loans. Higher yields also discourage investors from paying high prices for stocks and other investments.

The yield on the 10-year Treasury climbed as high as 4.63 per cent before the US stock market opened for trading, before receding to 4.55 per cent. It stood at 4.58 per cent late Wednesday and was as low as 4.01 per cent early last month. The two-year yield, which more closely tracks expectations for action by the Federal Reserve, slipped to 4.00 per cent from 4.02 per cent late Wednesday.

The House’s multitrillion-dollar spending bill, which aims to extend some $US4.5 trillion ($7 trillion) in tax breaks from President Donald Trump’s first term while adding others, is expected to undergo some changes when it gets to the Senate for a vote.

The legislation also includes a speedier rollback of production tax credits for clean electricity projects, which sent shares of solar companies tumbling. Sunrun dropped 38.2 per cent, Enphase Energy fell 19.7 per cent and First Solar slid 3.9 per cent.

Health care stocks were also falling early Thursday after the Centres for Medicare & Medicaid Services said it was immediately expanding its auditing of Medicare Advantage plans. UnitedHealth Group fell 0.9 per cent and Humana was down 5.1 per cent.

Wall Street had several economic updates on Thursday.

The number of Americans filing unemployment claims last week fell slightly. The broader employment market has remained strong, though businesses remain worried about the economic uncertainty amid a trade war.

The market gained ground earlier in trading before pulling back, following a better-than-expected report on manufacturing and services in the US The survey from S&P Global showed growth for both areas in May following a sluggish April.

“Business confidence has improved in May from the worrying slump seen in April, with gloom about prospects for the year ahead lifting somewhat thanks largely to the pause on higher rate tariffs,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

The report also reflected the impact of the trade war on supply chains, prices and concerns about the economic picture moving forward. New orders from businesses were the big driver for the improvement, but much of that was from businesses trying to get ahead of a potentially hefty round of tariffs that could hit the economy in July.

“Concerns over tariff-related supply shortages and price rises led to the largest accumulation of input inventories recorded since survey data were first available 18 years ago,” Williamson said.

A 90-day pause on some of President Donald Trump’s heftiest tariffs helped give some businesses and consumers some relief. They are already contending with broad tariffs and their impact on prices for a wide range of goods coming from trading partners around the world, including China, Canada and Mexico.

The overall rise in prices charged for goods and services in May was the steepest since August 2022, according to the S&P Global report.

Businesses have been warning investors about higher costs because of tariffs, prompting many to trim or pull financial forecasts. Many of them, including retail giant Walmart, have also warned consumers that they are raising prices on a wide range of goods because of higher import taxes.

In stock markets abroad, indexes fell across Europe and Asia. France’s CAC 40 dropped 0.6 per cent, Hong Kong’s Hang Seng fell 1.2 per cent and South Korea’s Kospi slid 1.2 per cent for some of the sharper losses.

AP

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