ASX Expected to Decline Following Limited Wall Street Gains

The Australian share market is anticipated to open lower on Thursday, following modest gains seen on Wall Street the previous night. Futures are indicating a potential drop of 0.37 percent, which translates to a decrease of 31 points at the market's opening.

This decline comes after the ASX experienced a robust performance on Wednesday, where it climbed by 0.8 percent. This optimistic movement was largely fueled by positive inflation data that led investors to believe that interest rate cuts could happen sooner than initially thought.

Wall Street's Performance

The US stock market held steady overnight. However, this stability came after a day when strong economic reports led to concerns that inflation rates and interest rates may remain elevated for longer than expected. The S&P 500 posted a slight increase of 0.2 percent, helping to recover from a larger drop of 1.1 percent the previous day. The Dow Jones Industrial Average saw an uptick of 106 points, or 0.3 percent, while the Nasdaq composite faced a minor decline of 0.1 percent.

On Thursday morning, the Australian dollar experienced a slight decline, trading at 62 US cents.

Bond Market Focus

The bond market has attracted increased attention recently, with modest movements seen following last month’s significant rise in yields. Higher yields often negatively impact stocks, as they increase borrowing costs for companies and households, nudging some investors to shift their focus from stocks to bonds.

After the economic reports released on Wednesday were not as strong as those from Tuesday, there was a sense of calm that returned to the market. Such reports can often discourage Wall Street since they can help foster hopes that the Federal Reserve might maintain or even consider cutting short-term interest rates. Lower interest rates are typically favorable for Wall Street as they can stimulate economic growth and increase investment prices.

Future Rate Expectations

In a speech, Federal Reserve Governor Christopher Waller expressed his belief that the central bank will likely implement further interest rate relief in 2025. He pushed back against emerging speculation that the Fed might have completed its rate cuts after enacting three reductions since September.

Waller mentioned that he does not foresee upcoming tariffs, potentially imposed under President-elect Donald Trump, to have a lasting impact on inflation. While inflation has shown persistent tendencies recently, he maintains that it is likely to trend downwards over time.

“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” Waller stated. “The pace of those cuts will depend on how much progress we make on inflation, while keeping the labor market from weakening.”

Job Market Insights Ahead

The yield on the two-year Treasury bond, which often reflects expectations for Federal Reserve actions, decreased slightly after Waller’s remarks and the release of a few economic reports. It fell to 4.27 percent from 4.29 percent experienced late on Tuesday.

One report indicated that US non-government employers reduced their hiring in December more than anticipated, hinting at what Friday’s more comprehensive jobs report from the Labor Department might reveal.

This upcoming update is expected to be a significant event for Wall Street this week. The aim is that the jobs report will display sufficient strength to alleviate recession concerns but not so robust that it deters the Federal Reserve from cutting rates further.

Stock Highlights

Among the top performers on Wall Street, eBay surged by 9.9 percent, marking the most significant gain in the S&P 500. This rise is attributed to their new partnership with Meta Platforms, wherein select eBay listings will feature on Facebook Marketplace in the US, Germany, and France.

Cal-Maine Foods also experienced a 1 percent increase after reporting stronger profits than analysts had predicted for the latest quarter. Their CEO noted that the company benefitted from higher demand driven by seasonal sales leading up to Thanksgiving.

Market Summary

When all was said and done, the S&P 500 increased by 9.22 points, closing at 5918.25. The Dow Jones Industrial Average climbed by 106.84 points, reaching 42,635.20, while the Nasdaq composite fell by 10.80 points, ending at 19,478.88.

As for international markets, results were mixed across Europe and Asia. South Korea's Kospi rose by 1.2 percent, while Hong Kong’s Hang Seng index faced a decline of 0.9 percent.

ASX, WallStreet, Economy