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Market Watch

The Australian share market looks set to rise again on Monday following a strong finish to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 34 points or 0.45% higher this morning. On Wall Street, the Dow Jones was up 1%,the S&P 500 rose 1.9%, and the NASDAQ jumped 2.65%.

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On the money today at opening Looking good on my watchlist anyway.
 

bigdog

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Wall Street rises as Fed rate move nears, earnings ramp up​

By STAN CHOE and ALEX VEIGA

Wall Street kicked off the week with a broad stock market rally Monday, as investors look ahead to a busy week of company earnings reports and grow more confident that the Federal Reserve will turn the screws on the economy less aggressively.

The S&P 500 rose 1.2%, led by tech companies. The gains more than made up for the benchmark index’s losses last week. The Dow Jones Industrial Average rose 0.8%, while the tech-heavy Nasdaq composite closed 2% higher. Small company stocks also rose, pushing the Russell 2000 index up 1.3%.

Markets have been churning for weeks with sharp swings in both directions. On one hand, they’ve benefited from hopes that the nation’s high inflation will continue to cool and get the Federal Reserve to loosen up on its blizzard of hikes to interest rates. On the opposite end, they’ve taken hits on worries about a possible recession because of rate hikes already pushed through by the Fed.

Monday’s gains follow a strong Friday, when stocks rallied on comments from a Fed official seen as a signal that the central bank may raise rates by just 0.25 percentage points next week. That would be a downshift from last month’s 0.50 point increase and from four straight earlier hikes of 0.75 points.

Higher rates intentionally slow the economy by making it more expensive for businesses and households to borrow, so a step down would mean less added pressure. The Fed has already pulled its key overnight rate up to a range of 4.25% to 4.5% from virtually zero early last year, and traders are now betting on a nearly 99% probability that the Fed will raise rates by just a quarter point on Feb. 1, according to CME Group.

The bigger question is how much further the Fed goes from there, and how long it will wait before it cuts interest rates. Such cuts can act like steroids for markets, and Wall Street is hoping they could arrive in the back half of this year. The Fed, meanwhile, has been adamant that it plans on holding rates high at least until 2024.

The yield on the two-year Treasury, which tends to track expectations for Fed movement, rose to 4.22% from 4.18% late Friday. The 10-year yield, which helps set rates for mortgages and other important loans, rose to 3.52% from 3.48%.

This year’s rally so far, with the S&P 500 up more than 4% in January already, is largely a result of how deeply pessimistic Wall Street become late last year, said Ryan Detrick, chief market strategist at Carson Group. With so many investors expecting further losses in 2023, “it was extremely lopsided,” he said, “and if you get any good news, you can get a bounce.”

“Have we had great news? No,” Detrick said. “But most of the inflation data is improving more than most people expected, which is opening the door for the Fed to take its foot off the pedal” and take it easier on rates.

More recently, concerns have also been rising on Wall Street about the strength of profits at companies because of the slowing economy and higher expenses. That’s key because profits are one of the main levers that set stock prices.

Baker Hughes, which provides services and equipment at oil fields, fell 1.5% in choppy trading after reporting weaker profit and revenue for its latest quarter than expected, despite analysts flagging strong orders and other encouraging signals in the report.

This upcoming week will see more than seven dozen companies in the S&P 500 report their results for the last three months of 2022, including some of the most influential. Headliners include Microsoft on Tuesday and Tesla on Wednesday.

Such big tech-oriented companies have already been announcing layoffs to cut expenses after acknowledging they misread the boom coming out of the pandemic and grew too quickly. Spotify said Monday it will cut 6% of its workforce, and it shares rose 2.1%.

Big Tech stocks carry particular weight on Wall Street because they’re some of the market’s most valuable. That means movements for their stock prices hold bigger sway over the S&P 500 and other indexes than smaller stocks.

After soaring through the pandemic thanks to super-low interest rates and a surge in demand from suddenly homebound customers, they’ve been struggling over the last year as the Fed has been furiously raising rates.

More recently, though, the combination of moderating inflation, easing rate hikes and steady job growth is making technology stocks and other high-valuation, growth-oriented companies attractive, said Peter Essele, head of portfolio management at Commonwealth Financial Network.

“This is a trend that has been forming over the past few weeks as we move from a value-led market which has existed in that high inflation, increasing inflation environment over the last 18 months,” he said.

Tech stocks in the S&P 500 rose 2.3% Monday, with chipmaker Advanced Micro Devices leading the pack with a 9.2% gain.

The S&P 500 gained 47.20 points to 4,019.81. The Dow rose 254.07 points to close at 33,629.56, while the Nasdaq added 223.98 points, finishing at 11,364.41. The Russell 2000 rose 23.43 points to 1,890.77.

Meanwhile, another partisan battle in Washington about the nation’s ability to borrow may add pressure on markets. Wall Street has seen this argument many times already, but if the two parties can’t agree to allow the U.S. government to borrow more, economists say it could create chaos in markets and cause a recession on its own.

Crunch time appears to be in the summer, but each day that it grows closer increases the risk.

In Asian markets, Tokyo’s Nikkei 225 added 1.3% despite Japan’s finance minister saying the country faces an “unprecedentedly severe” financial situation after spending heavily to counter the pandemic and other troubles.

Several other markets in Asia were closed for the Lunar New Year holiday. In Europe, stock indexes closed broadly higher.

MARKET WATCH

The Australian share market looks set to continue its rise on Tuesday following a strong night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 25 points or 0.34% higher.

The S&P 500 gained 47.20 points to 4,019.81. The Dow rose 254.07 points to close at 33,629.56, while the Nasdaq added 223.98 points, finishing at 11,364.41.

The S&P 500 rose 1.2%, led by tech companies. The gains more than made up for the benchmark index’s losses last week. The Dow Jones Industrial Average rose 0.8%, while the tech-heavy Nasdaq composite closed 2% higher.

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A SEA OF GREEN FOR SHARE TRADING YESTERDAY

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Stocks drift on Wall Street as earnings reports rev up​

By DAMIAN J. TROISE and ALEX VEIGA

Wall Street’s major stock indexes closed mixed Tuesday, as more big companies delivered their financial results for the last three months of 2022 amid lingering concerns about a potential recession.

The S&P 500 slipped less than 0.1%, its second loss in three trading days. The Dow Jones Industrial Average rose 0.3% and the Nasdaq composite fell 0.3%. Small company stocks also lost ground, with the Russell 2000 shedding 0.3%

The decline for major indexes marked a reversal from Monday, when a tech company-driven rally more than made up for the S&P 500′s losses last week.

Stocks have been volatile as investors try to get a better sense of how inflation is affecting the economy, the potential for a recession and whether the Federal Reserve can ease up on its aggressive interest rate increases.

The latest batch of earnings show that companies continue to struggle with the effects of inflation on consumers and supply chains.

Post-it notes and industrial coatings maker 3M fell 6.2% for the biggest drop among S&P 500 stocks after reporting weak fourth-quarter earnings and announcing job cuts. It is the latest company to announce layoffs as consumers get squeezed by inflation and worries grow about a bigger pullback in spending and a possible recession.

Union Pacific fell 3.3% after reporting disappointing earnings and revenue.

Microsoft rose 4% in afterhours trading after the software and technology giant reported earnings that topped Wall Street’s forecasts. It closed down 0.2% in regular trading.

All told, the S&P 500 slipped 2.86 points to 4,016.95. The Nasdaq gave up 30.14 points to close at 11,334.27, while the Dow added 104.40 points to 33,733.96.

The Russell 2000 index of small companies slid 5.16 points, or 0.3%, to finish at 1,885.61.

U.S. crude oil prices settled 1.8% lower.

Trading in more than a dozen companies was temporarily halted on the New York Stock Exchange after an apparent technical issue caused wide swings in their stock prices right as the market opened. Shares in Morgan Stanley, Wells Fargo, AT&T and other companies moved sharply at the open, triggering a halt in trading. The prices corrected after trading resumed. The NYSE says it is investigating the “reported issues” and all systems are now operational.

Markets have been swinging between hope and caution as investors watch to see if the Fed will adjust its inflation-fighting strategy. The central bank has already pulled its key overnight rate up to a range of 4.25% to 4.5% from virtually zero early last year.

The Fed will announce its next rate increase on Feb. 1 and traders expect a quarter-point raise, which would mark a softening of the central bank’s pace.

“Where the market and the Fed are having a fairly violent disagreement right now is how long are they going to leave rates at around 5%?” said Scott Ladner, chief investment officer at Horizon Investments.

Long-term bond yields fell. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.46% from 3.52% late Monday.

Wall Street will get a few economic updates this week that could provide more insight into inflation’s impact.

The government will release gross domestic product data for the fourth-quarter on Thursday. Economists expect less than 1% of growth, following 1.9% growth in the third quarter and a contraction during the first half of 2022. Investors will get more updates on personal spending and income on Friday.

MARKET WATCH

The Australian share market looks set to fall on Wednesday following a subdued night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 10 points or 0.1% lower this morning.

the S&P 500 slipped 2.86 points to 4,016.95. The Nasdaq gave up 30.14 points to close at 11,334.27, while the Dow added 104.40 points to 33,733.96.

The S&P 500 slipped less than 0.1%, its second loss in three trading days. The Dow Jones Industrial Average rose 0.3% and the Nasdaq composite fell 0.3%.

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ASX is closed today for Australia Day



Wall Street ends mixed after erasing a big morning loss​

By STAN CHOE

Another roller-coaster day left Wall Street essentially where it began on Wednesday, after stocks veered on worries about how badly a slowing economy will hit corporate profits.

The S&P 500 finished virtually unchanged, but only after it tumbled to a morning loss of 1.7% and then roared all the way back. The Dow Jones Industrial Average erased a 460-point loss to finish up 9 points. The Nasdaq composite fell 0.2% after coming back from a 2.3% drop.

Such big swings have been common on Wall Street as markets work through a couple competing big ideas. On one hand, worries are rising about weakening profits and an economy bending under the weight of hikes to interest rates by the Federal Reserve. On the other are hopes that the economy can avoid a severe recession and that cooling inflation will get the Fed to take it easier on rates.

“There’s this Jekyll and Hyde market day to day,” said Anthony Saglimbene, chief market strategist at Ameriprise. “What narrative is driving the market: a soft landing or harder landing?”

In the morning, the latter was driving trading.

Microsoft helped to lead the way lower after giving a forecast for upcoming results that fell short of some analysts’ expectations. They pointed in particular to expectations for slowing growth in its Azure cloud business.

Microsoft is one of Wall Street’s dominant stocks because it’s one of the largest, which gives its stock movements more sway over the S&P 500 than others. Not only that, analysts say Microsoft offers one of the best windows into the strength of corporate spending because of how many businesses use its software and services.

Microsoft fell as much as 4.6% in the morning before paring its loss to 0.6%. Its weaker-than-expected forecasts helped drag down other stocks in the cloud-computing industry in the morning. Snowflake fell as much as 7.9%, for example, before it pared its loss to 0.9%.

Worries are rising that corporate profits are set to shrink broadly because of a slowing economy, higher interest rates and still-high inflation. Analysts are forecasting S&P 500 companies over the next couple weeks will report their first drop in quarterly earnings per share since 2020, when the pandemic was crushing the economy. More cuts to estimates may be on the way for the first half of 2023.

“Analysts have been too rosy for the profit outlook for this year,” Saglimbene said. “As these companies are reporting, they’re giving very realistic and more downbeat assessments of what the demand outlook is going to look like this year, and there’s the realization that economic activity is slowing, profit growth is likely slowing and maybe even turning negative. And I think stock prices are adjusting to that.”

Texas Instruments fell as much as 3.1% despite reporting stronger profit and revenue for its latest quarter than expected. Markets were more interested in the company’s forecast for the first three months of 2023. Company officials said they’re expecting continued weakening in demand across all its markets outside of automotive. Its stock ended up paring its loss to 1.1%.

On the winning side was AT&T, which rose 6.6% after reporting stronger profit than forecast.

Shares of electric-vehicle maker Tesla shook off a morning loss of as deep as 4% to rise 0.4% ahead of its earnings report, which arrived after trading ended for the day. That helped to steady the market given Tesla’s large size.

All told, the S&P 500 slipped 0.73 points, or less than 0.1%, to 4,016.22. The Dow rose 9.88 points, or less than 0.1%, to 33,743.48, and the Nasdaq fell 20.91 points, or 0.2%, to 11,313.36.

The level of cash and profit that companies produce is one of the main levers that set stock prices on Wall Street. The other big one depends largely on interest rates, and there’s still a wide disconnect between what investors and the Federal Reserve see as coming later this year.

Nearly everyone is expecting the Fed to raise its key overnight interest rate by 0.25 percentage points on Feb. 1. That would be another downshift in the size of the Fed’s rate hikes, down from 0.50 points last month and four straight increases of 0.75 points earlier. A slowdown in inflation since a summertime peak is raising hopes for the Fed to apply less additional pressure on the economy.

Many investors expect inflation to keep cooling, and they’re betting on the Fed to actually begin cutting interest rates toward the end of this year. The Federal Reserve, meanwhile, says it wants to keep rates high at least through the end of the year to ensure high inflation is truly stamped out.

Higher rates hurt the economy by making it more expensive for businesses and households to borrow. They also hurt prices for stocks and other investments.

The yield on the 10-year Treasury, which helps set rates for mortgages and other economy-dictating loans, dipped to 3.44% from 3.46% late Tuesday. The two-year yield, which moves more on expectations for the Fed, fell to 4.14% from 4.21%.


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ASX is closed today for Australia Day

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Wall Street climbs to hit best level in nearly eight weeks​

By STAN CHOE

Stocks rose Thursday to send Wall Street to its highest level in nearly eight weeks following reports suggesting the economy and corporate profits may be doing better than feared.

The S&P 500 climbed 1.1% to clinch its highest finish since Dec. 2. The Dow Jones Industrial Average gained 205 points, or 0.6%, while the Nasdaq composite rallied 1.8%.

More swings may still be ahead, as Wall Street digests a growing torrent of earnings and economic reports. Markets have veered up and down recently as worries about a severe recession and drop-off in profits battle against hopes the economy can manage a soft landing and the Federal Reserve may ease up on interest rates.

Thursday’s headline report showed the overall economy held up better through the last three months of 2022 than economists expected, even with the weight of all the rate hikes the Fed approved last year to combat inflation. According to the U.S. government’s first of three estimates on it, the economy’s growth slowed to an annual rate of 2.9% in the quarter, which was stronger than the 2.3% that economists had forecast.

Other reports showed that orders for long-lasting goods from factories strengthened by more than expected in December and fewer workers applied for jobless claims than expected last wee

Strong data give hope the economy can withstand last year’s blizzard of rate hikes by the Fed, plus at least one more expected next week, without crashing to a deep recession. Higher rates intentionally slow the economy by making it more expensive to borrow to buy a home, a car or anything else on credit. They also drag down prices for stocks and other investments.

But a stronger-than-expected economy, particularly in the job market, can also carry risks. It could push the Fed to keep rates higher for longer in order to ensure inflation really is crushed. The Fed has already been saying repeatedly that it plans to do just that, at least through the end of the year, though many investors don’t seem to be buying it.

The yield on the 10-year Treasury, which helps set rates for mortgages and other loans crucial for the economy, rose to 3.49% from 3.45% late Wednesday. The two-year yield, which tends to more closely track expectations for Fed actions on interest rates, rose to 4.18% from 4.13%.

While Thursday’s report on the economy may have been encouraging at first blush, it included some concerning signals of slowdown underneath. It’s also backward looking, said Megan Horneman, chief investment officer at Verdence Capital Advisors.

“The first half of this year is going to be tough,” she said, pointing to recent weakness in both the manufacturing and services sectors of the economy.

But she added she’s “in the camp that says it will be relatively short and shallow because if you look at the foundation of the economy coming into this slowdown, there are a lot of things that are much stronger than you tend to see in past recessions.”

She cited the very low unemployment rate and relatively strong balance sheets at companies and households, among other things.

On the earnings front, reports from some big tech-oriented companies helped build optimism a day after worries flared following forecasts from Microsoft widely seen as discouraging.

Tesla jumped 11% after the electric-vehicle maker reported stronger profit for its latest quarter than analysts expected. Seagate Technology rose 10.9% after it reported stronger revenue and earnings than expected.

Steelmaker Nucor was also among the top-performing stocks in the S&P 500, rising 8.4% after beating Wall Street’s profit and revenue forecasts.

Chevron rose 4.9% after it raised its dividend and approved a program to buy back up to $75 billion of its stock. Both moves put cash directly in the pockets of shareholders, which caught criticism from Washington. White House spokesman Abdullah Hasan suggested oil companies instead “use their record profits to increase supply.”

On the losing end of Wall Street was Sherwin Williams. It fell 8.9% after reporting weaker revenue for its latest quarter than expected. It also gave a forecast for profit this upcoming year that fell well short of analysts’ expectations, as a weakened housing industry weighs on demand for paint.

IBM dropped 4.5% despite reporting profit and revenue that met Wall Street’s expectations. Analysts pointed to some below-forecast numbers related to how much cash it’s generating.

Southwest Airlines fell 3.2% after it said it lost more money than expected during its latest quarter, which was marred by more than 16,700 flight cancellations last month. It also said it expects to turn in a loss for the first three months of 2023.

All told, the S&P 500 rose 44.21 points to 4,060.43. The Dow climbed 205.57 to 33,949.41, and the Nasdaq composite gained 199.06 to 11,512.41.

MARKET WATCH

The Australian share market looks set to rebound on Friday following another positive night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 31 points or 0.4% higher this morning.

Stocks rose Thursday to send Wall Street to its highest level in nearly eight weeks following reports suggesting the economy and corporate profits may be doing better than feared.

The S&P 500 climbed 1.1% to clinch its highest finish since Dec. 2. The Dow Jones Industrial Average gained 205 points, or 0.6%, while the Nasdaq composite rallied 1.8%.

The S&P 500 rose 44.21 points to 4,060.43. The Dow climbed 205.57 to 33,949.41, and the Nasdaq composite gained 199.06 to 11,512.41.

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A SEA OF GREEN ON FRIDAY



Wall Street adds more to its big January after strong week​

By STAN CHOE and DAMIAN J. TROISE

A strong week for Wall Street closed out with modest gains Friday, sending the stock market to its highest level since early December.

The S&P 500 rose 0.2% to clinch its third winning week in the last four and was near its highest level since the summer, before fading at the end of the day. It’s rallied through January on growing belief inflation is on a steady downswing, hopefully leading to less pressure on the economy and markets.

The Dow Jones Industrial Average rose 28 points, or 0.1%, while the Nasdaq composite gained 0.9%.

Helping to lead the way was American Express, which jumped 10.5% despite reporting weaker profit and revenue for the latest quarter than expected. It gave a forecast for earnings through 2023 that topped Wall Street’s expectations and announced a planned increase to its dividend.

Another big gain for Tesla’s stock also supported the market. It rose 11% following its stronger-than-expected profit report for the end of 2022 released earlier in the week.

They helped offset a 6.4% loss for Intel following a jarring warning from the chipmaker. Not only did its revenue and earnings fall short of expectations last quarter, it also gave a forecast for revenue this quarter more than $2 billion below analysts’ expectations.

All told, the S&P 500 rose 10.13 points to 4,070.56. The Dow climbed 28.67 to 33,978.08, and the Nasdaq gained 109.30 to 11,621.71.

Hasbro fell 8.1% after saying it “underperformed” in this past holiday shopping season and will likely report a 17% drop in revenue for the fourth quarter. The company will cut about 1,000 jobs to reduce costs.

So far, the job market has remained remarkably resilient despite a slowing overall economy. Almost all of the high-profile layoff announcements have been within the tech industry, which raced to expand after the pandemic sent demand for technology soaring.

Earnings reporting season is entering its heart, and companies have been offering mixed results and forecasts. That’s helped lead to some big swings in markets.

Two competing big ideas have been sending Wall Street veering recently. On one hand are worries about a steep drop-off in profits and a severe recession for the economy following all the Federal Reserve’s increases to interest rates last year meant to crush inflation. On the other are hopes that cooling inflation may allow the Fed to take it easier on rates.

The market is partly trying to reconcile that weak earnings and a drop in demand may be necessary for inflation to keep cooling, said Keith Buchanan, portfolio manager at Globalt Investments.

“It’s kind of like this is the medicine the economy has to take,” he said.

Economic reports on Friday backed up recent data points suggesting inflation continues to moderate. The measure the Fed prefers, which doesn’t count food and energy costs, was 4.4% higher in December than a year earlier. That was down from 4.7% inflation in November.

Reports also showed that income growth for Americans slowed in December, while consumer spending fell off a bit more sharply than expected.

A separate report said U.S. consumers are also downshifting their expectations for inflation in the coming year. Over the long run, the University of Michigan said inflation expectations remain roughly where they’ve been for most of the last 18 months.

Economists said Friday’s data likely keeps the Fed on track to raise its key benchmark rate by 0.25 percentage points at its meeting next week. That would be a step down from its increase of 0.50 points last month and four straight hikes of 0.75 points before that.

Smaller increases would mean less added pressure on the economy, which has already seen damage done to the housing industry and other areas because of last year’s surge in rates.

The yield on the 10-year Treasury, which sets rates for mortgages and other important loans, held steady at 3.51%. The two-year yield, which moves more on expectations for Fed actions, held at 4.19%.

Next week could be another busy one for markets, with several high-profile events on top of the Fed’s announcement. The European Central Bank will give its latest decision on rates, the U.S. government will release its latest monthly check on the jobs market and more than 100 companies in the S&P 500 will report their quarterly results.

In stock markets overseas, India’s Sensex fell 1.5% as the Adani Group was again hit by heavy selling. Shares in seven Adani companies have plunged this week, wiping out billions of dollars in market value, after short-selling firm Hindenburg Research said it was betting against the conglomerate, which has holdings in energy, data transmission, construction and other major industries.

The Adani Group said it was considering legal action against Hindenburg following its allegations of stock market manipulation and accounting fraud.

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MARKET WATCH​


The Australian share market looks set to rise slightly on Monday following a positive finish to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 12 points or 0.15% higher this morning.

On Wall Street, the Dow Jones was up 0.1%, the S&P 500 rose 0.25 %, and the NASDAQ stormed 0.95% higher.

The S&P 500 rose 0.2% to clinch its third winning week in the last four and was near its highest level since the summer, before fading at the end of the day. It’s rallied through January on growing belief inflation is on a steady downswing, hopefully leading to less pressure on the economy and markets.

The Dow Jones Industrial Average rose 28 points, or 0.1%, while the Nasdaq composite gained 0.9%.

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Stocks sink as markets brace for big week with Fed, earnings​

By STAN CHOE

Stocks sank Monday as Wall Street prepped for a week full of potentially market-moving events, from decisions on interest rates around the world to earnings reports from the biggest U.S. companies.

The S&P 500 dropped 1.3%, giving back some of the gains that had carried it last week to its highest level since early December. The Dow Jones Industrial Average fell 260 points, or 0.8%, while the Nasdaq composite sank 2%.

Markets have been veering recently on worries that the economy and corporate profits may be set for a steep drop-off, along with competing hopes that cooling inflation will get the Federal Reserve to take it easier on interest rates.

The central bank’s next decision on rates is coming Wednesday, and most investors expect it to announce an increase of just 0.25 percentage points. That would be the smallest increase since March, following a spate of hikes of 0.75 points and then a 0.50-point increase, and it would mean less added pressure on the economy.

Higher rates combat inflation by intentionally slowing the economy, while also dragging down on prices for investments. Inflation has been cooling since the summer amid last year’s blizzard of rate hikes, but the economy has also been showing signs of concern.

The big question is whether Fed Chair Jerome Powell on Wednesday afternoon will give markets what they want to hear — hints that rate hikes will end soon and rate cuts may even be possible late this year — or stick to the Fed’s mantra that it plans to keep rates higher for longer, even if a modest recession hits.


“I think that they have no intention of cutting rates this year,” said Sam Stovall, chief investment strategist at CFRA Research, adding that the Fed waits an average of roughly nine months after its last rate hike before cutting.

“They’ll reiterate that they don’t want to make the mistakes of the 1970s,” he said, “but I think in the back of their minds, they’re going to say no matter which inflationary indicator you look at, they’re all heading in a stairstep downward pattern.”

Central banks for Europe and for the United Kingdom are also set to announce their latest increases for rates this week.

Beyond interest rates, more than 100 companies in the S&P 500 are scheduled this week to report how much profit they made in the last three months of 2022. Among them are tech heavyweights Apple, Amazon, and Google’s parent company. Because these companies are three of the four biggest on Wall Street by market value, their stock movements carry much more sway on the S&P 500 than others.

Apple’s 2% drop Monday, for example, was the heaviest weight on the S&P 500.

The only other stock that rivals them in size, Microsoft, shook Wall Street last week when it gave forecasts for upcoming results that raised worries about a slowdown in corporate spending on tech. Its stock fell 2.2% Monday.

All told the S&P 500 fell 52.79 points to 4,017.77. The Dow lost 260.99 to 33,717.09, and the Nasdaq fell 227.90 to 11,393.81.

Strategists at Morgan Stanley led by Michael Wilson warn tougher times may be ahead.

“The reality is that earnings are proving to be even worse than feared based on the data, especially as it relates to margins,” they wrote in a report. “Secondly, investors seem to have forgotten the cardinal rule of ‘Don’t Fight the Fed’. Perhaps this week will serve as a reminder.”

Later this week, the U.S. government will also give its latest monthly update on the job market. Hiring has remained resilient across the broad economy, even as housing and other corners weaken sharply under the weight of all the Fed’s rate hikes from last year.

Some big tech companies have announced high-profile layoffs after acknowledging they misread their boom coming out of the pandemic. But job cuts may be starting to spread to other areas of the economy. Hasbro and 3M last week announced layoffs.

All told, economists expect Friday’s report to show that U.S. employers added 187,500 more jobs than they cut during January. That would be a slowdown from December’s hiring of 223,000.

The yield on the 10-year Treasury rose to 3.53% from 3.51% late Friday. The two-year yield, which tends to move more on expectations of Fed actions, rose to 4.25% from 4.20%.

MARKET WATCH

The Australian share market looks set to edge LOWER on Tuesday after a poor start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 10 points lower.

The S&P 500 dropped 1.3%, giving back some of the gains that had carried it last week to its highest level since early December. The Dow Jones Industrial Average fell 260 points, or 0.8%, while the Nasdaq composite sank 2%.

All told the S&P 500 fell 52.79 points to 4,017.77. The Dow lost 260.99 to 33,717.09, and the Nasdaq fell 227.90 to 11,393.81.

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Wall Street climbs to add more to its strong January​

By STAN CHOE and DAMIAN J. TROISE

Wall Street closed out a strong January with more gains on Tuesday, ahead of what many investors hope will be one of the Federal Reserve’s last hikes to interest rates for a while.

Markets got a boost after a report showed that that growth for workers’ pay and benefits slowed during the end of 2022. While that’s frustrating for people trying to keep up with soaring prices, markets see it as an encouraging sign of easing pressure on inflation and possibly a gentler Fed in the months ahead.

The S&P 500 rose 58.83 points, or 1.5%, to 4,076.60. The benchmark index notched its third winning month in the last four. The Dow Jones Industrial Average rose 368.95 points, or 1.1%, to 34,086.04. The Nasdaq rose 190.74 points, or 1.7%, to 11,584.55.

With the pace of inflation cooling since the summer, virtually all of Wall Street expects the Fed on Wednesday to announce its smallest increase to interest rates since March, at 0.25 percentage points. That would be the latest stepdown after it pushed through four straight increases of 0.75 points and then a hike of 0.50 points.

Such moves try to stamp out inflation by intentionally slowing the economy and dragging down on prices for stocks and other investments. The worry is that too-high rates would cause a severe recession and drop-off in corporate profits

Such worries, combined with hopes for an easier Fed, have led to sharp swings in markets recently. They’ve hit not only day-to-day but also hour-to-hour. Analysts say much of this past month’s gains has been more about improving sentiment among investors than any big improvement in the economy or profits.

“As long as the Fed is raising interest rates, you will have market volatility,” said Mary Ann Bartels, chief investment strategist at Sanctuary Wealth.

“This is a market that is very bipolar,” she said. “And that’s actually healthy for a market. You don’t want one skewed too bullish,” or optimistic, and “you don’t want one skewed too bearish,” or pessimistic. “I think we’re balancing out that extreme bearishness in the market.”

She sees stocks continuing to grind higher through the year, led in particular by energy and industrial companies, though that may get hidden when simply looking at market indexes like the S&P 500 because those stocks are relatively small pieces of the market.

With seemingly everyone on the same page about what the Fed will do on Wednesday, the big question is what comes afterwards. The Fed has so far pledged to keep rates higher for longer to ensure inflation is truly defeated. Markets, meanwhile, are holding out hope that just one more small increase may be on the way in March and that cuts to rates could follow late in the year.

Other reports on the economy Tuesday came in lower than expected, which could give the Fed leeway to be less harsh on rates. A measure of confidence among consumers weakened in January, when economists were expecting it to stay flat. And a measure of business activity in the Midwest showed more weakness than expected for January.

Treasury yields fell immediately after the release of the report on employment costs, before paring their drops. The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, slipped to 3.50% from 3.54% late Monday. The two-year yield, which moves more on expectations for the Fed, dipped to 4.20% from 4.24%.

Earnings reporting season is also in top gear, with McDonald’s and other big companies headlining the day. They offered a mixed picture, much as reports have so far this reporting season.

McDonald’s fell 1.3% despite reporting stronger profit and revenue than analysts expected. What may have disappointed Wall Street was McDonald’s forecast for upcoming profit margins. They could imply inflation and cost pressures may be continuing to squeeze the company.

Caterpillar dropped 3.5% after it reported weaker profit than expected but stronger revenue.

On the winning side was General Motors, which revved up by 8.3% after reporting stronger profit and revenue than expected.

Stock markets in Asia closed mostly lower and European markets ended mixed.

MARKET WATCH

The Australian share market looks set to rise on Wednesday following a solid night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 44 points or 0.6% higher this morning.

The S&P 500 rose 58.83 points, or 1.5%, to 4,076.60. The benchmark index notched its third winning month in the last four. The Dow Jones Industrial Average rose 368.95 points, or 1.1%, to 34,086.04. The Nasdaq rose 190.74 points, or 1.7%, to 11,584.55.

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bigdog

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Stocks hit summer highs as Fed sees progress on inflation​

By STAN CHOE and DAMIAN J. TROISE

Wall Street climbed Wednesday to its best level since the summer following the latest hike to interest rates by the Federal Reserve, which said it’s finally seeing improvements in inflation.

The S&P 500 rallied back from an early 1% loss to rise 1% after Fed Chair Jerome Powell said the economy is on the path toward getting inflation lower. The Dow Jones Industrial Average erased a drop of 500 points to rise 6, while the Nasdaq composite jumped 2%.

As expected, the Fed raised its benchmark interest rate by 0.25 percentage points to its highest level since late 2007. It’s the smallest such increase in the Fed’s blizzard of rate hikes since March.

What’s more important for markets is where interest rates are heading next.

Much of Wall Street is hoping that cooling inflation since the summertime means the Fed may raise rates just a bit more, before taking a pause and then possibly cutting rates toward the end of the year. Rate cuts can ease pressure on the economy and juice investment prices.

The Fed’s Powell did reiterate Wednesday that “ongoing increases” in interest rates will be needed to bring inflation down to the Fed’s target level. And he said it was still way too early to declare victory over inflation.

But he also said, “We can now say, I think for the first time, that the disinflationary process has started.” That got Wall Street thinking about a future with no more rate increases.


“He had the opportunity to use his voice to tamp down market expectations, and he didn’t do it,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “Anyone that had taken a bet that the Fed was going to come out hard on financial positions lost that bet.”

Higher interest rates try to snuff out inflation by slowing the economy and dragging on prices for stocks and other investments. The Fed has already pulled its key overnight rate to its highest level since 2007, at a range of 4.50% to 4.75%, up from virtually zero early last year.

At stake is the economy, which many investors see likely heading down one of two paths: either a relatively short and shallow recession or a much deeper and more painful one. Building hopes for the former helped stocks rally through January to a strong start of the year.

Powell indicated he’s on the more optimistic side.

“My base case is that the economy can return to 2% inflation without a really significant downturn or really big increase in unemployment,” he said.

He also said he did not foresee any rate cuts this year.

Others in the market are not as optimistic. A third pathway for the economy is also possible, said Rich Weiss, senior vice president at American Century Investments: one that happened during the 1970s where inflation reignited after the Federal Reserve let up on interest rates too soon.

“We’re headed into a recession one way or the other, whether the Fed eases up on the brakes or not,” Weiss said. “So you might as well kill inflation while you’re doing it. I think it’s nonsensical to think the Fed is going to magically take their foot off at exactly the right time and slide into a short and shallow downturn and the stock market will come through unscathed.”

One area influencing expectations for the Fed is the job market, which has remained resilient. While strength there helps workers, a worry is that it could lead to too-high gains in wages that give inflation more fuel.

Reports on Wednesday gave a mixed picture on hiring. Private payrolls rose by 106,000 in January, according to ADP. That’s a slowdown from a month earlier and was below economists’ expectations.

But a separate report from the U.S. government indicated more strength. It said the number of job openings increased to 11 million in December, better than expected.

Treasury yields fell as Powell spoke, an indication of expectations for an easier Fed.

The two-year yield, which tends to track expectations for the Fed, fell to 4.11% from 4.21% late Tuesday. The 10-year yield, which helps set rates for mortgages and other important loans, fell to 3.42% from 3.51% late Tuesday.

A lackluster earnings reporting season also continues on Wall Street, with more mixed profit reports arriving from big U.S. companies.

Electronic Arts tumbled 9.3% after it gave forecasts for upcoming results that fell short of Wall Street’s expectations.

On the winning side was Advanced Micro Devices, which rose 12.6% even though its profit tumbled 98% in the fourth quarter from a year earlier. Its results were better than analysts expected.

All told, the S&P 500 rose 42.61 to 4,119.21, its highest close since August. The Dow gained 6.92, or less than 0.1%, to 34,092.96, and the Nasdaq jumped 231.77 to 11,816.32.

MARKET WATCH

The Australian share market will rise on Thursday following a wild night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 23 points or 0.3% higher this morning.

Wall Street climbed Wednesday to its best level since the summer following the latest hike to interest rates by the Federal Reserve, which said it’s finally seeing improvements in inflation.

The S&P 500 rallied back from an early 1% loss to rise 1% after Fed Chair Jerome Powell said the economy is on the path toward getting inflation lower. The Dow Jones Industrial Average erased a drop of 500 points to rise 6, while the Nasdaq composite jumped 2%.

All told, the S&P 500 rose 42.61 to 4,119.21, its highest close since August. The Dow gained 6.92, or less than 0.1%, to 34,092.96, and the Nasdaq jumped 231.77 to 11,816.32.

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Stocks hit summer highs as Fed sees progress on inflation​

By STAN CHOE and DAMIAN J. TROISE

Wall Street climbed Wednesday to its best level since the summer following the latest hike to interest rates by the Federal Reserve, which said it’s finally seeing improvements in inflation.

The S&P 500 rallied back from an early 1% loss to rise 1% after Fed Chair Jerome Powell said the economy is on the path toward getting inflation lower. The Dow Jones Industrial Average erased a drop of 500 points to rise 6, while the Nasdaq composite jumped 2%.

As expected, the Fed raised its benchmark interest rate by 0.25 percentage points to its highest level since late 2007. It’s the smallest such increase in the Fed’s blizzard of rate hikes since March.

What’s more important for markets is where interest rates are heading next.

Much of Wall Street is hoping that cooling inflation since the summertime means the Fed may raise rates just a bit more, before taking a pause and then possibly cutting rates toward the end of the year. Rate cuts can ease pressure on the economy and juice investment prices.

The Fed’s Powell did reiterate Wednesday that “ongoing increases” in interest rates will be needed to bring inflation down to the Fed’s target level. And he said it was still way too early to declare victory over inflation.

But he also said, “We can now say, I think for the first time, that the disinflationary process has started.” That got Wall Street thinking about a future with no more rate increases.


“He had the opportunity to use his voice to tamp down market expectations, and he didn’t do it,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “Anyone that had taken a bet that the Fed was going to come out hard on financial positions lost that bet.”

Higher interest rates try to snuff out inflation by slowing the economy and dragging on prices for stocks and other investments. The Fed has already pulled its key overnight rate to its highest level since 2007, at a range of 4.50% to 4.75%, up from virtually zero early last year.

At stake is the economy, which many investors see likely heading down one of two paths: either a relatively short and shallow recession or a much deeper and more painful one. Building hopes for the former helped stocks rally through January to a strong start of the year.

Powell indicated he’s on the more optimistic side.

“My base case is that the economy can return to 2% inflation without a really significant downturn or really big increase in unemployment,” he said.

He also said he did not foresee any rate cuts this year.

Others in the market are not as optimistic. A third pathway for the economy is also possible, said Rich Weiss, senior vice president at American Century Investments: one that happened during the 1970s where inflation reignited after the Federal Reserve let up on interest rates too soon.

“We’re headed into a recession one way or the other, whether the Fed eases up on the brakes or not,” Weiss said. “So you might as well kill inflation while you’re doing it. I think it’s nonsensical to think the Fed is going to magically take their foot off at exactly the right time and slide into a short and shallow downturn and the stock market will come through unscathed.”

One area influencing expectations for the Fed is the job market, which has remained resilient. While strength there helps workers, a worry is that it could lead to too-high gains in wages that give inflation more fuel.

Reports on Wednesday gave a mixed picture on hiring. Private payrolls rose by 106,000 in January, according to ADP. That’s a slowdown from a month earlier and was below economists’ expectations.

But a separate report from the U.S. government indicated more strength. It said the number of job openings increased to 11 million in December, better than expected.

Treasury yields fell as Powell spoke, an indication of expectations for an easier Fed.

The two-year yield, which tends to track expectations for the Fed, fell to 4.11% from 4.21% late Tuesday. The 10-year yield, which helps set rates for mortgages and other important loans, fell to 3.42% from 3.51% late Tuesday.

A lackluster earnings reporting season also continues on Wall Street, with more mixed profit reports arriving from big U.S. companies.

Electronic Arts tumbled 9.3% after it gave forecasts for upcoming results that fell short of Wall Street’s expectations.

On the winning side was Advanced Micro Devices, which rose 12.6% even though its profit tumbled 98% in the fourth quarter from a year earlier. Its results were better than analysts expected.

All told, the S&P 500 rose 42.61 to 4,119.21, its highest close since August. The Dow gained 6.92, or less than 0.1%, to 34,092.96, and the Nasdaq jumped 231.77 to 11,816.32.

MARKET WATCH

The Australian share market will rise on Thursday following a wild night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 23 points or 0.3% higher this morning.

Wall Street climbed Wednesday to its best level since the summer following the latest hike to interest rates by the Federal Reserve, which said it’s finally seeing improvements in inflation.

The S&P 500 rallied back from an early 1% loss to rise 1% after Fed Chair Jerome Powell said the economy is on the path toward getting inflation lower. The Dow Jones Industrial Average erased a drop of 500 points to rise 6, while the Nasdaq composite jumped 2%.

All told, the S&P 500 rose 42.61 to 4,119.21, its highest close since August. The Dow gained 6.92, or less than 0.1%, to 34,092.96, and the Nasdaq jumped 231.77 to 11,816.32.

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correction as spot Gold @ US$1,967 +$22 overnight!
 

bigdog

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Wall Street’s rally accelerates as technology stocks surge​

By STAN CHOE

Wall Street’s bang to start the year got even bigger Thursday, as tech stocks and a surge for Facebook’s parent company led the market higher.

The S&P 500 rallied 1.5% a day after hitting its best level since August. The Nasdaq composite soared 3.3%, while the Dow Jones Industrial Average lagged because it has less of an emphasis on tech. It slipped 39 points, or 0.1%.

Meta helped lead the way with a 23.3% leap after it reported better revenue for the latest quarter than analysts expected and said it expects to spend less this year than earlier forecast. While its latest profit fell short of expectations, Facebook’s parent also announced a program to buy back $40 billion of its stock.

Stocks had already been on the upswing through the start of the year on hopes that the Federal Reserve may be set to pause soon on its hikes to interest rates. Such increases help stamp out inflation but also hurt the economy and investment prices.

A day earlier, stocks and bonds took off after Fed Chair Jerome Powell said the central bank is finally starting to see progress in its battle against inflation. Markets took that as a cue that a pause may indeed be imminent, and investors even raised bets for cuts to rates late this year. Rate cuts act like steroids for markets, juicing prices and providing support for the economy.

That’s despite Powell saying on Wednesday that a couple more rate hikes will likely be appropriate to get inflation down to the Fed’s target. He also said he did not foresee any rate cuts in 2023 and again pledged to “stay the course until the job is done” on beating inflation.

“The market is saying the Fed may have its cake and eat it, too: inflation falling and growth not falling off a cliff so far,” said Ella Hoxha, senior investment manager at Pictet Asset Management.

She said the market seems to be putting a 75% probability on the Fed engineering a “soft landing” for the economy, where inflation can drop from its soaring heights without sending the economy into a painful recession.

“We would say at best it’s 50%, potentially lower,” Hoxha said.

She said there’s still a risk that the Fed will have to hold a tougher line on rates than markets expect if the U.S. labor market remains tight. That gives her pause as stock and bond prices rally so strongly around the world.

“It does feel like the market wants to pick pennies in front of a steamroller,” she said.

Thursday’s rally stretched across the Atlantic, where markets rose after central banks for Europe and the United Kingdom also raised rates in their efforts to squelch inflation.

The European Central Bank raised its key rate by 0.50 percentage points and said another would arrive next month. The Bank of England also raised its key rate by half a percentage point and said it’s seeing signs that inflation has turned the corner, though it also stressed it’s too soon to declare victory over inflation.

European stocks rallied, with the German DAX returning 2.2%. The FTSE 100 in London was up 0.8%.

Moves in Asia were more modest, with Hong Kong’s Hang Seng down 0.5% and Japan’s Nikkei 225 up 0.2%.

On Wall Street, big jumps for several Big Tech stocks helped lift the market ahead of their earnings reports, which came after trading closed for the day. Amazon and Google’s parent company, Alphabet, both jumped more than 7%, while Apple rose 3.7%.

Because these stocks are among the biggest by value, their movements carry more sway on the S&P 500 and other indexes.

The next milepost for the market is Friday morning’s U.S. jobs report, which economists expect will show a slowdown in hiring. The job market has largely remained resilient even in the face of swift rate hikes by the Fed over the last year.

Big tech companies have announced high-profile layoffs recently, but a report on Thursday suggested job cuts are not that widespread. Fewer workers applied for unemployment benefits last week than expected, and the number dropped to its lowest level since April.

Treasury yields dipped further Thursday, an indication of expectations for an easier Fed. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, fell to 3.39% from 3.42% late Wednesday. The two-year yield, which moves more on expectations for the Fed, slipped to 4.09% from 4.10%.

The S&P 500 rose 60.55 to 4,179.76, the Dow fell 39.02 to 34,053.94 and the Nasdaq shot up 384.50 to 12,200.82.

MARKET WATCH

The Australian share market looks set to rise again on Friday following a mixed night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 25 points or 0.3% higher this morning.

Wall Street’s bang to start the year got even bigger Thursday, as tech stocks and a surge for Facebook’s parent company led the market higher.

The S&P 500 rallied 1.5% a day after hitting its best level since August. The Nasdaq composite soared 3.3%, while the Dow Jones Industrial Average lagged because it has less of an emphasis on tech. It slipped 39 points, or 0.1%.

The S&P 500 rose 60.55 to 4,179.76, the Dow fell 39.02 to 34,053.94 and the Nasdaq shot up 384.50 to 12,200.82.

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bigdog

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Wall Street rally hits wall of hot jobs, cold earnings data​

By STAN CHOE

Wall Street’s big rally to start the year wilted on Friday after a surprisingly strong jobs report fueled worries about inflation and higher interest rates.

The S&P 500 fell 1% for its first drop in four days, though it took an up-and-down route to get there. The bond market was more decisive in thinking the strong jobs data could push the Federal Reserve to stay firmer than expected on high interest rates, which hurt the economy and markets.

The Dow Jones Industrial Average dropped 127 points, or 0.4%, while the Nasdaq composite sank 1.6%.

The market already looked like it was set to weaken coming into the day, before the jolting jobs report dropped. Late Thursday, several Big Tech companies among Wall Street’s most influential reported weaker profit for the latest quarter than analysts expected.

That cast concerns over a rally that had brought the S&P 500 back to its highest level since August, driven by hopes that cooling inflation may get the Federal Reserve to take a pause soon on its hikes to interest rates and possibly even cut them by late this year.

Then came the jobs report, which showed employers created a net 517,000 jobs last month. That was way above the 185,000 that economists expected and a sharp acceleration from December’s 260,000 jobs.

Normally, a strong jobs report is good for Wall Street because it means the economy is on firmer footing. But in this upside-down post-COVID world, it could also be a worrisome sign. The Fed is in the middle of trying to cool down the job market, in hopes of taking pressure off inflation.

The concern in the market is that the much stronger-than-expected hiring could keep the Fed on the “higher-for-longer” path on interest rates that it’s been talking about, even if markets haven’t been believing it fully.

“It’s going to get harder to argue that rate cuts may be in 2023’s future if the labor market is able to continue like this, especially considering that it remains to be seen how quickly inflation will fall, even if we have reached the peak,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.

Treasury yields zoomed higher immediately after the jobs report on forecasts for a firm Fed. The yield on the two-year Treasury, which tends to track expectations for the Fed, jumped to 4.30% from 4.10% late Thursday. The 10-year yield, which helps sets rates for mortgages and other important loans, rose to 3.53% from 3.40%.

The reaction in the stock market was more hesitant. Stocks opened with sharp losses, erased them all and then fell back later.

Some analysts said they were paying more attention to the data on wages in the jobs report than on overall hiring, which wasn’t as surprising.

Average hourly earnings for workers were 4.4% higher in January than a year earlier. That’s a slowdown from December’s 4.8% raise, though it was a touch above expectations. Slower wage gains can mean less pressure on inflation, though it hurts workers trying to keep up with rising prices at the register.

“The Fed has been downplaying the importance of the unemployment rate and payrolls number, focusing more on wage gains instead,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “Wage gains were in line with the consensus expectations, so I’m not as worried as most about the path ahead for the Fed.”

Also helping to muddy the picture was a report showing the U.S. services sector returned to growth in January. It was a much stronger reading than expected, though it also suggested pricing pressures may be easing.

Drops for some Big Tech stocks were weighing on the market following weaker-than-expected earnings reports.

Amazon fell 8.4% and was the single biggest weight on the S&P 500, while Google’s parent company dropped 2.7%. Because they’re among the most valuable stocks on Wall Street, their movements carry more weight on the S&P 500 than others.

On the winning side was Clorox, which jumped 9.8% after reporting much stronger profit for the end of 2022 than expected.

All told, the S&P 500 fell 43.28 to 4,136.48. The Dow dropped 127.93 to 33,926.01, and the Nasdaq lost 193.86 to 12,006.95.

Despite the stall, the S&P 500 still closed out its fourth winning week in the last five. It also remains 15.6% above its low point reached in October.

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bigdog

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The Australian share market looks set to rise slightly on Monday despite a poor finish to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 12 points or 0.15% higher this morning.

On Friday, the S&P 500 fell 43.28 to 4,136.48. The Dow dropped 127.93 to 33,926.01, and the Nasdaq lost 193.86 to 12,006.95.

The S&P 500 fell 1% for its first drop in four days, though it took an up-and-down route to get there. The bond market was more decisive in thinking the strong jobs data could push the Federal Reserve to stay firmer than expected on high interest rates, which hurt the economy and markets.

The Dow Jones Industrial Average dropped 127 points, or 0.4%, while the Nasdaq composite sank 1.6%.

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bigdog

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Stocks slip as worries about high rates weigh on Wall Street​

By STAN CHOE and DAMIAN J. TROISE

Wall Street shaved off more of its strong start to the year on Monday, adding to losses from the end of last week driven by worries about higher interest rates and inflation.

The S&P 500 fell 25.40, or 0.6%, to 4,111.08 for its second straight fall after a stunningly strong report on the U.S. jobs market dented the market’s hopes for easing interest rates. The Dow Jones Industrial Average fell 34.99 points, or 0.1%, to 33,891.02, while the Nasdaq composite dropped 119.50, or 1%, to 11,887.45.

Some of the sharpest action was again in the bond market, where expectations are rising for the Federal Reserve to stay firm on keeping interest rates higher for longer to combat inflation. It’s something the Fed has been talking about for a long time, but also something the market has been stubborn about not believing fully.

The yield on the two-year Treasury, which tends to track expectations for the Fed, leaped. It zoomed to 4.47% from 4.29% late Friday and just 4.10% the day before. That’s a significant move for the bond market. The 10-year yield, which helps set rates for mortgages and other important loans, jumped to 3.64% from 3.52% late Friday.

Higher rates slow the economy by design, in hopes of limiting the purchases by households and businesses that can fuel inflation. But they also raise the risk of a severe recession and hurt markets in the meantime.

Friday’s jolting jobs report showed that U.S. employers added a third of a million more jobs than expected last month despite higher rates. Normally, such strength would be good news for markets. At the least, it should mean higher sales for many companies.

But it also raised worries a too-strong labor market will keep inflationary pressures alive and force the Fed to keep rates higher for longer. That’s in direct opposition to hopes in the market that cooling inflation could get the Fed to pause its rate increases soon and then cut rates late this year.

Such hopes had driven a big rally on Wall Street to start the year, and the S&P 500 still remains up more than 7% for 2023 so far. The stocks leading the way had been the ones most beaten down last year by the rattlingly swift rise in rates engineered by the Fed to combat inflation. Those include tech stocks and others seen as the riskiest or most expensive.

Investors came into the year extremely skeptical about such stocks, and once they got a spark higher, momentum for them quickly snowballed. Analysts have said the rebound was more about improvements in sentiment than any changes in the economy or other fundamentals.

The positive sentiment has been partially checked by more signs of softer demand in the technology sector and more caution about spending from businesses overall.

Stocks are currently in a “go nowhere fast zone after a superb January performance,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. He expects trading to remain choppy until investors get more clarity on the economic path ahead.

“It’s still too early to determine to what extent we’ll have a recession,” Sandven said.

Fed Chair Jerome Powell may give some more clues about where rates are heading on Tuesday, when he’s scheduled to speak at the Economic Club of Washington, D.C.

Besides Powell, markets are also waiting to hear from nearly 100 companies in the S&P 500 this week about how much profit they made during the final three months of 2022.

The earnings reporting season is at its halfway point, with roughly half the companies in the S&P 500 companies having reported, and they’re on track for a roughly 5% drop from year-earlier levels, according to FactSet. That would be the first such drop since the summer of 2020, when the pandemic was ravaging the global economy.

Tyson Foods 4.6% fell after it reported weaker profit and revenue for its latest quarter than analysts expected.

Dell Technologies dropped 3% after it said it will cut about 5% of its workforce. The company’s vice chairman said in a message to employees that “market conditions continue to erode with an uncertain future.”

MARKET WATCH
The Australian share market looks set to edge ever so slightly higher on Tuesday following a poor night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 1 point higher.

Wall Street shaved off more of its strong start to the year on Monday, adding to losses from the end of last week driven by worries about higher interest rates and inflation.

The S&P 500 fell 25.40, or 0.6%, to 4,111.08 for its second straight fall after a stunningly strong report on the U.S. jobs market dented the market’s hopes for easing interest rates. The Dow Jones Industrial Average fell 34.99 points, or 0.1%, to 33,891.02, while the Nasdaq composite dropped 119.50, or 1%, to 11,887.45.

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bigdog

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Wall Street rallies after swerving on Fed chair’s comments​

By STAN CHOE

Wall Street rallied Tuesday after the Federal Reserve signaled last week’s stunningly strong jobs report won’t by itself change where interest rates are heading, as some investors had feared.

The S&P 500 climbed 1.3% following a shaky day where stocks pinballed between losses and gains as Fed Chair Jerome Powell gave his first public comments since raising rates last week. The Dow Jones Industrial Average rose 265 points, or 0.8%, while the Nasdaq composite jumped 1.9%.

High inflation and how high the Fed will take interest rates to combat it have been at the center of Wall Street’s wild movements for the last year. Powell said on Tuesday that progress is being made on inflation, though a long battle remains.

That echoed similar comments he made last week, after the Fed approved its smallest increase to interest rates since March. But that was before a jolting jobs report on Friday showed U.S. employers added a third of a million more jobs than expected last month.

The shocking show of strength raised concerns about upward pressure on inflation and worries the Fed may end up keeping rates higher for longer, as it’s been warning. Higher rates can drive down inflation but also hurt the economy and investment prices.

But Powell said Tuesday at the Economic Club of Washington, D.C., that the market’s big moves since the jobs report have gotten it closer to in sync with the Fed’s thinking. Not only did stocks fall, Wall Street raised its forecast for how high the Fed will take rates by the summer.


Investors also reduced bets that the Fed may cut rates later this year. Rate cuts can goose the economy and act like steroids for markets.

“We have a significant road ahead to get inflation down to 2%,” which is the Fed’s target, Powell said Tuesday. “There’s been an expectation that it will go away quickly and painlessly. I don’t think that’s at all guaranteed.”

Powell also said that if more jobs reports or inflation data come in way above expectations, the Fed may ultimately raise rates even higher than it’s been saying.

After pulling its key overnight rate all the way to a range of 4.50% to 4.75%, up from virtually zero a year ago, the Fed has said it envisions a couple more increases before holding steady through the end of the year.

Treasury yields have zoomed higher recently on expectations for a firmer Fed. They held relatively steady Tuesday

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.68% from 3.64% late Monday. The two-year yield, which moves more on expectations for the Fed, rose to 4.49% from 4.47% and is near its highest level since November.

Despite all the market’s recent moves, stock prices are still up a healthy amount since the start of the year. The S&P 500 is up 8.5%. Much of that was due to easing worries the economy may fall into a severe recession, a scenario described in markets as a “hard landing.”

“If I had to take a camp today, it would be in the soft-landing one, if only because of the strength of the labor market,” said Ross Mayfield, investment strategy analyst at Baird. He said he sees a “slowdown or maybe a soft recession, but that’s what I think a ‘soft landing’ means now” for the economy.

“The problem is that with the market rally to start the year, you’ve got that scenario priced in almost,” he said. “There are still risks to the downside.”

A relatively lackluster earnings reporting season on Wall Street is also rolling on.

Carrier Global dropped 3.8% despite matching analysts’ expectations for profits in the latest quarter. It also gave a forecast for revenue this upcoming year that was slightly above Wall Street’s expectations. Analysts pointed to a deceleration in orders.

On the winning end was DuPont, which climbed 7.5% after reporting stronger profit for the latest quarter than analysts expected. Activision Blizzard gained 5.6% after the video-game company reported stronger revenue and profit for its latest quarter than expected.

A 4.2% move higher for Microsoft also helped lift the market. It said it’s using ChatGPT-like technology in its Bing search engine.

All told, the S&P 500 rose 52.92 to 4,164.00, the Dow gained 265.67 to 34,156.69 and the Nasdaq rose 226.34 to 12,113.79.

In stock markets overseas, Sydney’s S&P-ASX 200 lost 0.5% after the Reserve Bank of Australia raised its benchmark rate by 0.25 percentage points to 3.35%. It said more hikes are planned to lower inflation that is at a 33-year high of 7.8% to its target range of 2% to 3%.

In Japan, the Nikkei 225 slipped less than 0.1% after the government reported wages rose 4.8% over a year earlier in December. That was close to a three-decade high as workers press for higher pay to keep pace with inflation.

MARKET WATCH

The Australian share market looks set to rise on Wednesday following a volatile but solid night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 34 points or 0.1% higher this morning.

The S&P 500 rose 52.92 to 4,164.00, the Dow gained 265.67 to 34,156.69 and the Nasdaq rose 226.34 to 12,113.79.

The S&P 500 climbed 1.3% following a shaky day where stocks pinballed between losses and gains as Fed Chair Jerome Powell gave his first public comments since raising rates last week. The Dow Jones Industrial Average rose 265 points, or 0.8%, while the Nasdaq composite jumped 1.9%.

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Stocks fall on Wall Street, giving back some recent gains​

By STAN CHOE and DAMIAN J. TROISE

Stocks fell on Wall Street Wednesday, giving back some of their recent gains as uncertainty about interest rates and inflation continues to reign.

Investors also reviewed another set of mixed earnings reports from big companies. The latest round of financial results and forecasts could help give Wall Street a clearer picture of how inflation is shaping consumer spending and business plans.

The S&P 500 fell 46.14 points, or 1.1%, to 4,117.86 and is now on track for weekly losses after a few days of choppy trading. The Dow Jones Industrial Average fell 207.68 points, or 0.6%, at 33,949.01. The Nasdaq composite fell 203.27 points, or 1.7%. to 11,910.52.

The pullback follows Tuesday’s gain of 1.3% for the S&P 500, which came after the first public comments by Federal Reserve Chair Jerome Powell since the central bank raised interest rates last week. Markets found some solace in Powell’s signaling that Friday’s exceptionally strong jobs report wouldn’t by itself push the Fed to get more aggressive on interest rates.

But analysts pointed out that Powell’s comments were just as tough on inflation as before. He said that while he has seen improvements in inflation, the road ahead is still long to get it fully under control. The Fed can help drive down inflation by raising interest rates and keeping them high, but that also raises the risk of a deep recession and hurts investment prices in the meantime.

The Fed has been saying that it plans to hike interest rates a couple more times and then hold them at a high level at least through the end of the year. Wall Street moved its forecast for how high rates will go by the summer closer to the Fed’s following Friday’s blockbuster report showing much stronger job growth than expected, which could raise the pressure on inflation. But investors are still betting on the possibility of a cut to rates late this year.

“We’ve got this kind of push and pull going on that’s generating a lot of volatility,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.

John Williams, the president of the Federal Reserve Bank of New York, said he still thinks the Fed’s main interest rate hitting a target of 5% to 5.5% by the end of the year is “a very reasonable view,” even after Friday’s exceptionally strong jobs report. With the federal funds rate currently sitting in a range of 4.50% to 4.75%, that would be in line with expectations for two more increases before a pause. He spoke at a CFO Network summit hosted by the Wall Street Journal.

But Williams also warned that interest rates may need to go higher if stock prices rally and bond yields fall too much, among other loosening financial conditions, because that could drive inflation higher.

Uncertainty about where inflation and interest rates are heading has been at the center of Wall Street’s big swings for the last year. So have shifting expectations for the economy to fall into a deep recession, which would kneecap corporate profits.

Companies have so far been reporting relatively lackluster earnings for the last three months of 2022, as rising costs eat into their margins

“It sounds like companies are starting to prepare for a tougher economy going forward,” McMillan said. “There’s a real sense out there that things going forward are likely going to be worse than they are now.”

Chipotle Mexican Grill fell 5% after it reported weaker profit and revenue for the latest quarter than Wall Street expected.

Jack Henry & Associates, a company in the financial technology industry, sank 9.3% for one of the biggest drops in the S&P 500 after it reported weaker results than expected and trimmed financial forecasts for the full fiscal year.

Lumen Technologies tumbled 20.8% despite reporting stronger results than expected. Its forecasts for some financial measures in 2023 fell short of analysts’ expectations.

On the winning side was CVS Health, which gained 3.5% after topping Wall Street’s forecasts for revenue and profit. It also said it would buy Oak Street Health, a primary care company, in a deal it valued at about $10.6 billion.

Entertainment giant Walt Disney rose 1.8% in afterhours trading after it reported surprisingly good fiscal first-quarter financial results.

In the bond market, Treasury yields were holding relatively steady after zooming higher in recent days on expectations for a firmer Fed.

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, slipped to 3.62% from 3.68% late Tuesday. The two-year yield, which moves more on expectations for the Fed, dipped to 4.43% from 4.47%.

In stock markets abroad, trading on Istanbul’s exchange was suspended after the market benchmark sank more than 7% as Turkey struggled with the aftermath of a magnitude 7.8 earthquake that has killed more than 9,500 people. It was unclear when trading would resume.

MARKET WATCH
The Australian share market is expected to drop on Thursday following a poor night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 31 points or 0.4% lower this morning.

The S&P 500 fell 46.14 points, or 1.1%, to 4,117.86 and is now on track for weekly losses after a few days of choppy trading. The Dow Jones Industrial Average fell 207.68 points, or 0.6%, at 33,949.01. The Nasdaq composite fell 203.27 points, or 1.7%. to 11,910.52.

The pullback follows Tuesday’s gain of 1.3% for the S&P 500, which came after the first public comments by Federal Reserve Chair Jerome Powell since the central bank raised interest rates last week. Markets found some solace in Powell’s signaling that Friday’s exceptionally strong jobs report wouldn’t by itself push the Fed to get more aggressive on interest rates.

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