ASX set for more joy as Wall Street bounces; $A jumps

The 10-year Treasury yield fell to 3.76 per cent from 3.86 per cent late Wednesday and from 3.98 per cent late Tuesday. It helps set rates for mortgages and other important loans.

The two-year Treasury yield fell to 4.63 per cent from 4.75 per cent late Wednesday and from 4.89 per cent late Tuesday. It moves more on expectations for action by the Fed.

The drop for yields accelerated after James Bullard said in the afternoon that he’s stepping down as president of the St. Louis Federal Reserve Bank to join Purdue University’s business school as its dean next month. He was one of the loudest voices at the Fed pushing for higher rates to control inflation.

Easier interest rates help all kinds of investments. But many investors see big technology and other high-growth stocks among the biggest beneficiaries.

That had Amazon, Alphabet and Nvidia among the strongest forces pushing up the S&P 500. Amazon gained 2.7 per cent after it said the first day of its annual Prime Day event on Tuesday was the biggest sales day in its history.

Alphabet rose 4.7 per cent after Google said it’s rolling out Bard, its chatbot powered by artificial intelligence, to more countries around the world and launching new features for it.

Nvidia, which has been at the centre of a frenzy on Wall Street around AI, rose 4.7 per cent.

PepsiCo added 2.4 per cent after it beat analysts’ profit expectations for the spring. It saw lower demand for drinks and snacks, but higher prices helped its earnings. PepsiCo also raised its forecasts for results for the full year.

The earnings reporting season is just getting underway, and JPMorgan Chase will lead a barrage of banks on Friday that will tell investors how much they made during the spring. Expectations overall are dim, and analysts are forecasting the sharpest drop in earnings for S&P 500 companies since the pandemic was walloping the global economy in the spring of 2020.

A resilient job market has nevertheless been keeping the economy out of a recession. A report on Thursday showed fewer workers applied for unemployment benefits last week than expected. To be sure, too strong of a job market could also push the Federal Reserve to get more aggressive about interest rates and inflation.

While inflation is showing encouraging signals, Wall Street may be piling too quickly into a consensus that it will keep cooling enough for the Federal Reserve to ease up on rates and prevent a recession, warned Chun Wang, senior research analyst and co-portfolio manager at Leuthold.

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In a report, Wang said the market may be underestimating the risk that inflation stays stuck at 3 per cent to 4 per cent in the next six to 12 months and that “the path forward for both inflation and the Fed policy is not a no-brainer at all. We get the sneaking suspicion that the current soft landing narrative will be seriously challenged before the first leaf falls from the tree.”

On the losing side of Wall Street Thursday was Exxon Mobil. It fell 1.8 per cent after saying it would buy Denbury, which owns carbon dioxide pipelines, for $US4.9 billion ($7.1 billion) in stock. Denbury fell 1.3 per cent.

AP