ASX set to dip to kick off budget week
By Stan Choe
US stocks coasted to the close of another winning week on Friday.
The S&P 500 rose 0.2 per cent to finish a third straight winning week following its mostly miserable April. It had been on pace for a bigger gain in the morning, but that mostly disappeared following a discouraging report on US consumer sentiment.
Wall Street recorded another winning week in May. Credit: NYSE
The Dow Jones gained 0.3 per cent and the Nasdaq composite edged down by less than 0.1 per cent. The Australian sharemarket is set to dip, with futures pointing to a loss of 15 points, or 0.2 per cent, at the open. The federal budget will be delivered on Tuesday.
The S&P 500 has climbed back within 0.6 per cent of its record on revived hopes that the Federal Reserve may deliver cuts to interest rates this year. A flood of stronger-than-expected reports on profits from big US companies has also helped support the market.
Gen Digital jumped 15.3 per cent after reporting better profit for the first three months of 2024 than analysts expected. The cyber safety company, whose brands include Norton and LifeLock, also authorised a program to buy back up to $US3 billion of its stock. It joined a lengthening list of companies announcing big such programs, which helps goose per-share earnings for investors.
Novavax nearly doubled and shot 98.7 per cent higher after announcing a deal with Sanofi that could be worth more than $US1.2 billion. The agreement includes a license to co-commercialise Novavax’s COVID-19 vaccine worldwide, with some exceptions. Novavax also reported a slightly smaller loss for the latest quarter than analysts expected.
They helped offset a drop of 11 per cent for Akamai Technologies, which topped expectations for profit but fell short for revenue. The cloud-computing, security and content delivery company also gave some financial forecasts for the upcoming year that fell short of analysts’ expectations.
It said the strengthening of the US dollar’s value against other currencies is slicing into its business, along with slowing traffic growth across the industry. That helped overshadow its own announcement of a program to buy back up to $US2 billion of its stock.
In the bond market, Treasury yields rose following the discouraging preliminary report from the University of Michigan.
It suggested sentiment among US consumers is weakening by much more than economists expected, and the drop was large enough to be “statistically significant and brings sentiment to its lowest reading in about six months,� according to Joanne Hsu, director of the survey of consumers.
Potentially even more discouraging is that US consumers were forecasting inflation of 3.5 per cent in the upcoming year, up from their forecast of 3.2 per cent a month earlier. If such expectations spiral higher, the fear is that it could lead to a vicious cycle that worsens inflation.
It highlights how some companies have recently been describing increasing struggles among their customers, particularly their lower-income ones.
The yield on the 10-year Treasury rose to 4.50 per cent from 4.46 per cent late Thursday. But the movement was still relatively modest compared with its drop from 4.70 per cent late last month.
Markets may remain on hold until Wednesday’s highly anticipated update on US inflation at the consumer level, according to rates strategists at Bank of America. Traders are still largely penciling in one or two cuts to interest rates by the Federal Reserve this year, according to data from CME Group.
“Right now, the market is in a good mood thanks to a decent earnings season and a Fed that has a high bar to hiking,� according to Brian Jacobsen, chief economist at Annex Wealth Management. “That mood can change quickly.�
Last week, Federal Reserve Chair Jerome Powell helped pull yields lower after saying the central bank remains closer to cutting its main interest rate than hiking it, despite a string of stubbornly high readings on inflation this year. The Fed has been keeping its main interest rate at the highest level in more than two decades in hopes of getting high inflation fully under control.
A cooler-than-expected jobs report at the end of last week, meanwhile, suggested the US economy could pull off the tricky balancing act of staying solid enough to avoid a bad recession but not so strong that it worsens inflation.
In stock markets abroad, London’s FTSE 100 rose 0.6 per cent after the government reported the UK economy bounced back to growth at the start of the year. The performance was better than expected, and it snapped two straight quarters where the economy shrank.
In Japan, Tokyo’s Nikkei 225 rose 0.4 per cent after a report showed strong auto exports whittled down the nation’s trade deficit and it racked up solid returns on overseas investments.
AP
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