ASX set to rise, Wall Street wavers as tech giants slump
All told, the S&P 500 fell 22.89 points to 5,998.74, while the Dow dropped 138.25 points to 44,722.06. The Nasdaq fell 115.10 points to 19,060.48.
Traders also had their eye on new reports on the economy and inflation Wednesday.
The US economy expanded at a healthy 2.8 per cent annual pace from July through September, according to the Commerce Department, leaving its original estimate of third-quarter growth unchanged. The growth was driven by strong consumer spending and a surge in exports.
The update followed a report on Tuesday from the Conference Board that said confidence among US consumers improved in November, but not by as much as economists expected.
Consumers have been driving economic growth, but the latest round of earnings reports from retailers shows a mixed and more cautious picture.
Department store operator Nordstrom fell 8.1 per cent after warning investors about a trend toward weakening sales that started in late October. Clothing retailer Urban Outfitters jumped 18.3 per cent after beating analysts’ third-quarter financial forecasts. Weeks earlier, retail giant Target gave investors a discouraging forecast for the holiday season, while Walmart provided a more encouraging forecast.
Consumers, though resilient, are still facing pressure from inflation. The latest update from the US government shows that inflation accelerated last month. The personal consumption expenditures index, or PCE, rose to 2.3 per cent in October from 2.1 per cent in September.
Overall, the rate of inflation has been falling broadly since it peaked more than two years ago. The PCE, which is the Federal Reserve’s preferred measure of inflation, was just below 7.3 per cent in June of 2022. Another measure of inflation, the consumer price index, peaked at 9.1 per cent at the same time.
The latest inflation data, though, is a sign that the rate of inflation seems to be stalling as it falls to within range of the Fed’s target of 2 per cent. The central bank started raising its benchmark interest rate from near-zero in early 2022 to a two-decade high by the middle of 2023 and held it there in order to tame inflation.
The Fed started cutting its benchmark interest rate in September, followed by a second cut in November. Wall Street expects a similar quarter-point cut at the central bank’s upcoming meeting in December.
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“Today’s data shouldn’t change views of the likely path for disinflation, however bumpy,” said David Alcaly, lead macroeconomic strategist at Lazard Asset Management. “But a lot of observers, probably including some at the Fed, are looking for reasons to get more hawkish on the outlook given the potential for inflationary policy change like new tariffs.”
President-elect Donald Trump has said he plans to impose sweeping new tariffs on Mexico, Canada and China when he takes office in January. That could shock the economy by raising prices on a wide range of goods and accelerating the rate of inflation. Such a shift could prompt the Fed to rethink future cuts to interest rates.
Treasury yields slipped in the bond market. The yield on the 10-year Treasury fell to 4.25 per cent from 4.30 per cent late Tuesday. The yield on the two-year Treasury, which more closely follows expected actions by the Fed, fell to 4.22 per cent from 4.25 per cent late Tuesday.
US markets will be closed Thursday for Thanksgiving, and will reopen for a half day on Friday.
