ASX set to dip despite Wall Street gains

Several banks and Delta Air Lines helped kick off the reporting season last week with reports that were better than feared. This upcoming week will feature reports from Bank of America, Netflix and Tesla, among others.

While last week’s earnings reports offer just a small sample size, the season’s start is encouraging because of how strong corporate forecasts have generally been for future results, according to strategists at Bank of America.

“We expect the momentum to continue,” the strategists led by Savita Subramanian wrote in a BofA Global Research report. They expect earnings declines for S&P 500 companies to bottom out this reporting season.

Also coming up this week will be the latest monthly update on sales at US retailers. Strong spending by US consumers has been one of the main reasons for the economy’s resilience, driven by a remarkably sturdy job market.

Such data dovetailed with inflation that’s been on the decline have helped the S&P 500 soar nearly 18 per cent so far this year. The hope among investors is that all of it together will push the Federal Reserve to soon put a halt to its blistering campaign to raise interest rates.

To be sure, the stock market’s big run also has critics warning it’s gotten too sure of itself. It’s still not a certainty yet that the economy will avoid a recession, that inflation will continue to coast lower and that corporate profit growth will indeed recover.

The wide expectation is for the Fed to raise rates at its meeting next week, which would take the federal funds rate to its highest level since 2001. But the hope among traders nevertheless is that will be the final hike of this cycle.

Easier interest rates help all kinds of stocks, but investors see big technology and other high-growth stocks as some of the biggest beneficiaries.

Several helped the market to rise Monday, including Tesla, which climbed 3.2 per cent. Tesla also said over the weekend that its first production Cybertruck electric pickup has rolled off the assembly line, though that was nearly two years behind the original schedule.

Activision Blizzard rose 3.5 per cent after a US appeals court on Friday rejected a bid by regulators to block the video game maker’s $US68.7 billion ($100.7 billion) purchase by Microsoft. Microsoft also said on Sunday it agreed with Sony to keep the popular Call of Duty series on the PlayStation console following its acquisition of Activision Blizzard, a move that could help ease regulators’ worries about the deal.

Microsoft’s stock added 0.1 per cent.

Loading

On the losing end was Ford, which fell 5.9 per cent. It cut the sticker price on its F-150 Lightning electric pickup by thousands of dollars.

In markets abroad, stocks in Shanghai slipped 0.9 per cent following the weak Chinese economic data, and South Korea’s Kospi slipped 0.4 per cent. Markets in Japan were closed for a holiday and Hong Kong’s market was shuttered due to a typhoon.

In Europe, the losses were modest outside of a 1.1 per cent drop for France’s CAC 40.

In the bond market, Treasury yields fell modestly. The yield on the 10-year Treasury slipped to 3.80 per cent from 3.84 per cent late Friday.

AP

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.