ASX Set to Rise as Wall Street Anticipates Fed Rate Cut

On Friday, US stock indexes saw an upward trend, primarily driven by a surge in Amazon's stock. A surprising jobs report, which fell far short of expectations, added to the prevailing belief that the Federal Reserve will implement another interest rate cut in the coming week.

US Market Performance

The S&P 500 index increased by 0.4%, helping to recover from a loss experienced the previous day, which was its steepest drop in eight weeks. The Dow Jones Industrial Average also had a strong showing, climbing 288 points or 0.7%, while the Nasdaq composite rose by 0.8%.

The Australian stock market appears poised for growth, with futures indicating a potential gain of 36 points, or 0.4%, at the opening on Saturday. This comes after a mixed trading session on Wall Street.

Amazon's Impact

Amazon's stock jumped 6.2% after reporting a surprisingly robust profit for the latest quarter that exceeded analyst expectations, acting as a primary catalyst for the increase in the S&P 500. Meanwhile, Intel saw its shares rise by 7.8% despite posting a larger loss than anticipated, thanks to better-than-expected revenue and positive forecasts for the current quarter.

Another notable performer was Cardinal Health, whose shares surged 7% after it reported earnings and revenue that surpassed analyst projections and raised its profit forecast for the fiscal year, which is only in its second quarter.

Apple's Decline

Despite these gains, Apple's stock declined by 1.2%, as the company forecasted revenue growth in the crucial holiday quarter to be in the low to mid-single digits, falling below several analysts' predictions.

Labor Market Insights

In the bond market, Treasury yields rose following the release of the jobs report that indicated only 12,000 new jobs were added to the payrolls in October, significantly below the 115,000 expected and the 223,000 jobs created in September. This data has reinforced expectations that the Fed will cut its main interest rate by a quarter point this week, as the weak job numbers have eliminated any lingering possibilities of rates being held steady.

The Federal Reserve had commenced its rate-cutting initiative in September with an unusual half-point reduction, focusing more on solidifying the job market rather than solely addressing inflation. After the jobs report, the two-year Treasury yield increased slightly to 4.20%, while the 10-year Treasury yield also rose to 4.37%.

Challenges Ahead

Economists have highlighted that the jobs report contains a mix of noise, making it challenging to derive conclusive insights. Factors such as two devastating hurricanes and a strike at Boeing contributed to the disappointing employment numbers.

Despite the troubling labor market trends, there remains optimism on Wall Street that the economy can avoid recession, aided by anticipated interest rate cuts by the Fed which may help stimulate growth.

Moreover, a separate manufacturing report indicated a more profound contraction than expected, marking one of the sectors most affected by the Fed's prolonged high-interest rate policy until September.

Global Markets Reaction

In overseas markets, most European indexes rose while many Asian markets, apart from Hong Kong, finished lower. In terms of commodities, the price of oil saw an uptick, with a barrel of benchmark US crude advancing by 0.4%, similar to Brent crude.

ASX, WallStreet, Fed