ASX Expected to Decline Following Modest Gains on Wall Street

The Australian share market is anticipated to experience a decline on Thursday morning, following limited gains on Wall Street overnight. Futures indicate a potential drop of 0.37 percent, equivalent to 31 points, at the market's opening.

This expected decline comes after the ASX demonstrated strong performance on Wednesday, gaining 0.8 percent due to encouraging inflation data that left investors hopeful for potential interest rate cuts in the near future.

Wall Street's Performance

In the United States overnight, Wall Street showed some resilience, recovering slightly after prior losses. The S&P 500 managed to rise by 0.2 percent, recovering a portion of its previous day’s 1.1 percent slump. Meanwhile, the Dow Jones Industrial Average added 106 points, reflecting a 0.3 percent increase. The Nasdaq composite, on the other hand, experienced a slight downturn, decreasing 0.1 percent.

On Thursday morning, the Australian dollar weakened marginally, trading at 62 US cents.

Bond Market Developments

The bond market has recently garnered more focus on Wall Street, with movements being relatively modest after last month's significant surge in yields. An increase in yields can negatively impact stocks by raising borrowing costs for both companies and households, shifting some investors’ interest towards bonds.

Market calm returned following reports on the economy that were not as robust as those released earlier in the week. This, in turn, can create optimism on Wall Street, as it raises expectations that the Federal Reserve might continue to lower short-term interest rates. Lower rates tend to stimulate the economy and positively impact investment prices.

Federal Reserve governor Christopher Waller indicated in a recent speech that he still expects the central bank to implement further rate cuts in 2025. He reassured that potential upcoming tariffs from President-elect Donald Trump would likely not have a significant long-term impact on inflation. Despite recent stubbornness in inflation rates, Waller believes it is trending downward overall.

Waller stated, “If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025.” He also mentioned that the rate cut pace will depend on progress in combating inflation while maintaining employment stability.

Employment Reports and Expectations

The yield on the two-year Treasury note, which closely mirrors expectations for Federal Reserve actions, dropped following Waller’s comments and the release of several economic reports. It decreased from 4.29 percent to 4.27 percent.

One particular report indicated that US businesses outside the government reduced hiring in December more than economists had anticipated. This may provide insight into what to expect from the Labor Department's more comprehensive jobs report set to be released on Friday.

This upcoming report will be a focal point for Wall Street this week, especially with the stock market closing on Thursday in observance of a national day of mourning for former President Jimmy Carter. There are hopes that the jobs report will reflect enough strength to ease recession concerns, while not so strong as to deter the Fed from cutting rates.

Corporate Highlights

On a positive note for Wall Street, eBay saw a notable increase of 9.9 percent, making it the biggest gainer in the S&P 500. This surge comes as the company announced a collaboration with Meta Platforms to pilot select eBay listings on Facebook Marketplace in various countries including the US, Germany, and France.

Cal-Maine Foods also rose by 1 percent after reporting stronger-than-expected profits for the latest quarter, attributing this success to a seasonal boost in demand for eggs prior to Thanksgiving.

Overall, the S&P 500 increased by 9.22 points to finish at 5918.25. The Dow Jones Industrial Average saw a gain of 106.84 points, closing at 42,635.20, while the Nasdaq composite decreased by 10.80, closing at 19,478.88.

Internationally, stock indexes displayed mixed results across Europe and Asia. South Korea’s Kospi climbed by 1.2 percent, while Hong Kong’s Hang Seng index fell by 0.9 percent.

ASX, WallStreet, Stocks