Damian Troise
US stocks kicked off a busy week with mixed trading on Wall Street that is keeping the market hovering around its all-time high.
The S&P 500 rose 0.1 per cent and is trading around its record set last week. The Dow Jones Industrial Average rose 228 points, or 0.4 per cent, in early afternoon trade. The Nasdaq composite fell 0.2 per cent.
The Australian sharemarket is set to rise, with futures pointing to a gain of 15 points, or 0.2 per cent, at the open. The ASX added 0.8 per cent on Monday. The Australian dollar was trading at US69.58¢.
Energy stocks had some of the biggest gains as oil prices jumped. Chevron rose 1.4 per cent.
Technology stocks were the biggest weights on the market. Micron Technology fell 2.8 per cent and Advanced Micro Devices fell 2.4 per cent. They are among several companies in the sector with big stock values that tend to have a heavy influence on the market. They have also been the driving force behind the broader market’s record gains throughout the year.
Those companies could face more scrutiny from investors during this round of corporate earnings as Wall Street tries to get a better sense of whether the stock gains made during the frenzy over artificial intelligence can translate into future growth.
“AI continues to support growth, reinforcing the outlook for tech and critical suppliers across the supply chain,” wrote Magdalena Ocampo, market strategist at Principal Asset Management, in a report. “Yet uncertainty about AI’s long-term impact persists, making future gains more reliant on earnings delivery rather than potential.”
Stocks are reaching for records often because of the tech sector, but remain very volatile on a daily basis, partly because of big shifts in oil prices and their impact on bond yields and inflation.
The price of Brent crude, the international standard, jumped 2 per cent to $US106.77 per barrel. Prices have been swinging between $US96 and nearly $US110 over the last month over uncertainty about the US war with Iran and its continued impact on global energy supplies and inflation.
Prices jumped despite President Donald Trump’s announcement on social media Friday that he struck a deal to buy Russian diesel with Russian President Vladimir Putin, aiming to tamp down a spike in fuel prices ahead of the Nov. 3 US midterm elections. The plan, though, runs counter to US efforts to cut the flow of money Russia gets from oil and gas sales that can be used to pay for its war against Ukraine.
Higher oil prices have been driving gasoline prices higher. That’s a direct hit to many people’s wallets, as gasoline is usually a necessary expense. The rise in diesel is more indirect, raising the costs for just about any shipped product, which usually results in higher prices for everything from food to clothing.
The surge in energy prices and its impact on the broader economy will be a key focus this week as Wall Street reviews several important economic updates. They include fresh data on the housing market, inflation and retail sales.
The big updates this week involve reports about inflation hitting consumers and businesses. On Wednesday, the government will release the closely-watched consumer price index, or CPI, which measures price changes for a wide range of products and services. Economists expect the index to show the rate of inflation worsened to 3.6 per cent in September from 3.4 per cent in August.
A report on inflation called the producer price index will be released on Thursday and is also expected to show that inflation remains stubbornly high. It measures inflation faced by businesses before it hits consumers.
An update on how consumers are reacting to high prices will be released on Thursday. Economists expect the report on retail sales for September to show that households pulled back on spending.
The rate of inflation by any measure remains well above the Federal Reserve’s target rate of 2 per cent. That prompted the central bank to raise its benchmark interest rate at its last meeting in an effort to cool inflation. Wall Street expects another rate hike before the year ends.
Inflation and expectations for high interest rates have been driving Treasury yields higher in the bond market. The 10-year Treasury yield, which influences mortgage rates, recently touched its highest level since 2002. It has since eased a bit and stood at 5.24 per cent late Friday. US bond trading was closed Monday for the Columbus Day holiday.
Higher mortgage rates have been weighing on the housing market and Wall Street will get an update on home sales on Tuesday.
The latest round of corporate earnings updates ramps up this week with financial results from banks. Citigroup, JPMorgan Chase and Wells Fargo will report their results on Tuesday and Bank of America will report its results on Wednesday. They have been reporting record profits throughout the year and Wall Street expects more of the same for the latest quarter.
Markets in Europe gained ground and markets in Asia were mostly lower. Markets in Tokyo were closed for a holiday.
AP
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