ASX set to fall, Wall Street loses ground as oil prices rise

Stocks on Wall Street closed broadly lower as oil prices climbed to their highest level in more than four years, ratcheting up pressure on the market.

The S&P 500 fell 0.5 per cent, adding to its decline from a day before. The index posted its second-straight weekly loss. The Dow Jones Industrial Average fell 1.2 per cent, and the Nasdaq composite slipped 0.2 per cent after giving up a modest gain.

The Australian sharemarket is set to fall, with futures on Saturday pointing to a fall of 43 points, or 0.5 per cent, at the open. The Australian dollar was trading at US70.26¢.

Rising oil prices weighed heavily on the market, where nearly three out of every four stocks within the benchmark S&P 500 index fell. The price for a barrel of Brent crude oil rose 3.1 per cent to settle at $US116.72. It has surged from less than $US97 at the start of October and is now at its highest level since June 2022.

Several AI-related companies rallied, helping ease some of the impact from the broader market slide. Micron Technology rose 2.5 per cent, Intel gained 1.7 per cent, Microsoft added 0.7 per cent, and Advanced Micro Devices closed 1.7 per cent higher.

The tech sector’s influence is also capable of quickly switching over to a heavy weight. Stocks that have benefited from the frenzy over AI have been swinging over rising worries about their path ahead. Investors are worried about whether their high prices are justified. Many of those companies have been borrowing to fund investments in AI technology and high interest rates are making those loans more expensive.

“Investors appear increasingly focused on the economics of AI, particularly the substantial upfront costs required to build AI infrastructure and the uncertainty around the timing of returns on those investments,” said Angelo Kourkafas, senior global strategist at Edward Jones, in a research note.

The latest round of corporate earnings are being closely watched to help get a better sense of whether those investments are paying off, or might pay off. Several influential AI-related companies report their latest financial results next week, including Google’s parent, Alphabet, along with Microsoft and Amazon.

Industrial companies had some of the biggest losses. Caterpillar fell 2.4 per cent.

American Express slumped 3.7 per cent, one of several financial stocks that lost ground, despite reporting profits for its most recent quarter that beat analysts’ forecasts. The company did announce its first major job cuts in roughly a decade.

JPMorgan Chase fell 1.5 per cent, Citigroup dropped 1.5 per cent and Capital One Financial slid 1 per cent.

While higher oil prices weighed down much of the market, they helped boost energy companies. Chevron rose 2.9 per cent and ConocoPhillips gained 3.6 per cent.

European markets closed mostly lower. France’s main index fell 0.4 per cent, though yields on French government bonds eased a bit.

Treasury yields in the US edged higher following sharp drops on Thursday. The yield on the 10-year Treasury edged up to 4.99 per cent from 4.96 per cent late Thursday.

Yields have been rising globally, partly over worries about governments taking on too much debt. Inflation also remains a concern and is stubbornly well above 3 per cent in the US That prompted the Federal Reserve to raise its benchmark interest rate at its last meeting in an effort to cool inflation.

Wall Street expects the central bank to hold rates steady at its meeting next week, but is leaning heavily toward another rate hike in December.

Wall Street will also get several big economic updates next week, including the Fed’s preferred measure of inflation. The personal consumption expenditures index, or PCE, is expected to show that inflation rose at a 3.7 per cent rate in September, sharply above the Fed’s 2 per cent target.

The US war with Iran has severely cut the world’s oil supply, driving energy prices higher and fuelling a sharp jump in the cost of everything from gasoline to food and clothes.

All told, the S&P 500 fell 39.75 points to 7,623.68. The Dow dropped 652.82 points to 52,215.16, and the Nasdaq gave up 53.52 points to close at 25,955.34.

AP

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