Wall Street rally stalls before GDP figures; ASX closed
By Rita Nazareth
Wall Street struggled to gain much traction and closed largely unchanged, with traders gearing up for economic data that will help shape the views on the Federal Reserve’s next steps.
Equities wavered after their biggest gain in two months as investors awaited results from Meta Platforms. Meta’s shares tanked in extended trading as the social media giant increased its spending estimates for the year after the market had closed, once again raising questions about whether CEO Mark Zuckerberg’s futuristic technological bets will eventually pay off for investors.
The Australian sharemarket is closed for Anzac Day. It finished flat on Wednesday after the March quarter inflation figures showed price pressures remained sticky, which could push out the possibility of a rate cut from the Reserve Bank.
Wall Street closed little changed, with much of the action happening after the bell.Credit: Bloomberg
The S&P 500 closed flat at 5071.63, while the Dow Jones Industrial Average shed 0.1 per cent and the Nasdaq 100 edged up 0.1 per cent.
With several high-profile earnings reports coming in, Mark Hackett at Nationwide said this week’s results would test Wall Street’s comfort. While the cohort of seven megacaps has done well in the last two years because of their superior earnings-per-share growth relative to the broader market, this advantage could decrease in 2024 and even more significantly in 2025, Hackett noted.
“The Magnificent Seven are not nearly as powerful as they once were,” he noted, but the broadening of the market would create pockets of opportunity for the rest of the S&P 500. “We see this as a positive development for investors looking to diversify away from the recent market leaders.”
Mega’s fellow megacap Tesla surged 12 per cent after Elon Musk vowed to launch less-expensive vehicles. AI chip maker Nvidia halted a two-day rally.
Boeing fell 2.9 per cent after revealing it lost $US355 million ($547 million) on falling sales in the first quarter, another sign of the crisis gripping the aircraft maker as it faces increasing scrutiny over the safety of its planes.
US Treasuries remained lower after a jumbo-sized sale of notes failed to assuage concerns about more losses.
For weeks, traders have been scaling back how many rate cuts they expect from the Fed amid a string of resilient economic data. Economists surveyed by Bloomberg predict gross domestic product likely cooled to around 2.5 per cent in the first quarter, with the figures still suggesting persistent inflationary pressures.
“Tomorrow’s pivotal GDP report comes as market participants hope for a soft number that would lead to rate cuts sooner rather than later,” said Jose Torres at Interactive Brokers. “We expect a stronger-than-projected figure. It would be great for revenue growth prospects, but bad for the timing and extent of rate cuts.”
US 10-year bond yields rose four basis points to 4.64 per cent.
Buoyed by strong economic data and persistent inflation, traders have sought higher yields for holding government bonds as they revise down their expectations of Federal Reserve rate cuts, according to Fawad Razaqzada at City Index and Forex.com. However, higher yields and rates signal the cost of servicing US federal debt is becoming burdensome, he noted.
Interest rates staying elevated longer, along with economic uncertainty and geopolitical turmoil have lessened the appeal of some of the stock market’s cheapest strategies.
Investors this month have pulled some $US200 million out of value-based exchange-traded funds, according to data compiled by Bloomberg Intelligence. In contrast, growth stocks have attracted more than $US3 billion in inflows — despite a shaky stock market that’s raised concerns of more downside to come. That diminished interest in cheap stocks comes on the heels of lacklustre performances of common value products.
To Katrina Dudley at Franklin Templeton, valuations are fair — therefore companies need to continue to deliver on earnings growth.
“For the market overall, we’ll be watching guidance for the remainder of the year closely,” said Matt Palazzolo at Bernstein Private Wealth Management. “While it’s good to know how companies did from January to March — it’s more important now to have a sense for managements’ expectations for the balance of the year.”
Bloomberg
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