Damian Troise and Alex Veiga
Updated ,first published
Stocks are drifting on Wall Street and oil prices fell after the US and Iran paused their attacks while work resumed on restarting negotiations to end the war.
The S&P 500 fell 0.2 per cent. The index is coming off two weekly losses in a row. The Dow Jones rose 155 points, or 0.3 per cent. The Nasdaq composite fell 0.4 per cent.
The Australian sharemarket is set to shed some of the previous session’s big gains, with futures at 4.55am AEST pointing to a fall of 31 points, or 0.4 per cent, at the open. The ASX jumped by 1.4 per cent on Monday. The Australian dollar was trading at US69.90¢.
Oil prices reversed course from a week ago, when a sharp escalation in fighting between the US and Iran worsened worries about global oil supplies. The price of Brent crude, the international standard, dropped 9.1 per cent to $US87.93 a barrel for September delivery. Prices surged to over $US100 a barrel last week before easing. West Texas Intermediate was 8 per cent lower to $US82.14.
The war between the US and Iran has sharply curtailed, and at times halted, traffic through the vital Strait of Hormuz. That has had a ripple effect throughout the world’s economy. Gasoline prices have surged and shipping costs for most goods are rising, with businesses typically passing those costs along to households.
President Donald Trump called on the Federal Reserve to lower interest rates, saying the US should have the lowest interest rate in the world.
“Rates should be lowered… We have other countries that are paying less interest rates,” Trump told reporters aboard Air Force One.
“We should have the lowest interest rate in the world,” Trump said.
“Kevin is fantastic, but he’s got a board, and the board members are very political,” Trump said, referring to Fed chair Kevin Warsh, adding he knew what Warsh wanted to do. The Federal Reserve will announce its interest rates decision on Thursday (AEST), with markets expecting the central bank to stay on hold.
Bond yields fell. The yield on the 10-year Treasury fell to 4.65 per cent from 4.69 per cent late Friday.
Technology companies were behind much of the shifts on Wall Street, with gains and declines for a mix of big companies resulting in uncertain trading.
Nvidia fell 5.1 per cent and Micron Technology slumped 4 per cent. At the same time, Microsoft rose 3 per cent and Apple rose 0.8 per cent. They are all among the most valuable companies in the world and those market values give them more influence over the direction of the broader market.
The mix of gains and losses from a variety of those companies had more impact in pushing and pulling the market, even as the majority of companies in the S&P 500 gained ground.
In Asia, Chinese memory chipmaker CXMT soared in its debut in Shanghai. The company jumped to become China’s most valuable listed company with an estimated market capitalisation of 3.3 trillion yuan (nearly $US490 billion).
Wall Street has a busy week ahead with several potentially mark-moving updates on the economy and company earnings. Reports are due out on consumer confidence Tuesday and inflation on Thursday.
“This is a week with more than its fair share of potential surprises, good and bad,” said Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley.
The big focus will be on the Federal Reserve, which will give an update Wednesday on its interest rate policy. The central bank has been grappling with the impact from rising inflation because of the ongoing US war with Iran. It also has to contend with a fresh round of US-imposed tariffs globally, which could further worsen inflation.
Wall Street anticipates a nearly 36 per cent chance that the Fed will raise interest rates at its meeting this week. Higher rates can help cool inflation by making borrowing more expensive and slowing economic growth.
The central bank has been holding rates steady throughout the year as it monitors inflation’s direction and impact, but Wall Street expects at least one rate hike by the end of the year.
Stubbornly high inflation has been squeezing households and fuel costs have hit budgets and spending particularly hard. Gasoline costs are taking a bigger chunk out of household budgets, and that could mean tighter spending on other things like clothing and travel.
Investors are monitoring the latest round of corporate earnings for signs of consumer stress along with whether the yearlong jump in stock values throughout Wall Street is justified by profits and forecasts for profit growth.
Investors also have a heavy round of corporate earnings to review this week. Many of those reports could provide more clues into the health of different areas of the economy. Paint and coatings maker Sherwin-Williams, aircraft maker Boeing and payments processor Visa will report their latest results on Tuesday.
Starbucks and Chipotle will report results on Wednesday.
Technology companies are being especially watched because their sharp gains throughout the year have been behind the Wall Street’s record run. Microsoft will report results Wednesday. Amazon, with its growing cloud services business and AI-focus, will report results on Thursday, along with Apple.
AP
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