ASX set to rise after Wall Street ends first half of year on a high

The Fed has already raised rates a mammoth 5 percentage points from close to zero early last year. Traders on Wall Street pared back bets that the Fed may raise interest rates twice again this year, with most betting the federal funds rate will be only 0.25 percentage points higher at the end of 2023, if it all, according to data from CME Group.

Yields in the bond market turned lower after the release of the economic data. The 10-year Treasury yield fell to 3.82 per cent from nearly 3.87 per cent just before the report’s release. It helps set rates for mortgages and other important loans.

‘There’s lots of noise around the edges, but tepid consumption growth and a downward trend for inflation means the end is near for rate hikes.’

Brian Jacobsen, chief economist at Annex Wealth Management.

The two-year Treasury yield, which moves more on expectations for the Fed, slipped to 4.88 per cent from 4.90 per cent just before the report’s release.

A separate report from the University of Michigan said sentiment among consumers was improving, but their expectations for inflation weren’t rising. That could also make for an easier Fed. The central bank has said it wants to avoid a vicious cycle where expectations for high inflation drive behaviour that only worsens inflation.

Easier interest rates help prices for all kinds of investments. But technology and other high-growth stocks tend to be seen as some of the biggest winners, and they helped to lead the market.

Nvidia rose 3.7 per cent, for example. It’s been among a small cadre of stocks that have exploded higher this year amid a frenzy about artificial-intelligence software. It’s up 189.5 per cent for the year so far.

Apple climbed 2.3 per cent to become the first US stock to end a day with a total market value of more than $US3 trillion ($4.5 trillion).

Cruise line operators also helped drive the rally. Carnival led all stocks in the S&P 500 with a 9.7 per cent gain, while Norwegian Cruise Line climbed 4.2 per cent. Travel stocks have been hot recently on expectations for strong demand as vacationers head back out.

On the losing end of Wall Street was Nike. It fell 2.6 per cent after reporting weaker profit for the latest quarter than expected, though its revenue topped forecasts.

One criticism of the stock market’s rally this year has been how much of it was because of just a handful of big technology stocks. Gains recently have broadened out a little, and the market’s smallest stocks rose 0.4 per cent, as measured by the Russell 2000 index.

Stocks are generally more expensive than they’ve been historically, relative to their profits, but they still look “in the zone of OK”, said US Bank’s Erickson. She is suggesting investors stick to a “neutral” approach, not bulking up any more than usual on stocks versus bonds but also not abandoning them.

All told, the S&P 500 rose 53.94 points to 4450.38. The Dow gained 285.18 to 34,407.60, and the Nasdaq climbed 196.59 to 13,787.92.

The S&P 500 closed out its sixth winning week in its last seven and its best month since October. The index’s gain of 15.9 per cent through the first six months of the year is better than it’s done in 16 of the last 23 full years.

In stock markets abroad, one of the world’s best stock markets this year took a breather after Japan’s Nikkei 225 slipped 0.1 per cent. It still rose 27.2 per cent in the first six months of 2023.

The US stock market will be open a half-day on Monday and closed Tuesday for the Independence Day holiday.

AP

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