ASX rises as miners and healthcare shares rise

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Nvidia, another stock that has soared to dizzying heights as a result of Wall Street’s frenzy over artificial intelligence technology, has also given up some of its big recent gains. It fell 10 percent and was by far the heaviest weight on the S&P 500, due to its sheer size.

Technology stocks in the S&P 500 lost 7.3 percent overall this week, their worst performance since March 2020, after some global giants reported discouraging trends. For example, ASML, a Dutch company that is a major supplier to the semiconductor industry, reported weaker than expected orders for early 2024.

The bigger threat was an emerging, dispiriting recognition on Wall Street that interest rates could likely remain high for longer.

Top Fed officials said this week they could keep rates at their high levels for a while. That is a letdown for traders after the Fed previously indicated that three interest rate cuts would be possible this year.

High interest rates negatively impact the prices of all types of investments. Among the hardest hit tend to be those stocks that are considered the most expensive and that make investors wait the longest for big growth, which can make tech stocks vulnerable.

“The gigantic sucking noise of optimism (escaping) from the market is due to the Fed’s lack of foresight and irrational focus on where inflation has been rather than where it is going.”

Brian Jacobsen, chief economist at Annex Wealth Management

Lower interest rates previously seemed on the horizon after inflation cooled sharply last year. But a series of reports this year showing that inflation has remained higher than expected has raised concerns about stagnant progress.

Fed officials are adamant that they want to see additional evidence that inflation is moving toward its 2 percent target before cutting the Fed’s key interest rate, which is at its highest level since 2001.

Traders are now largely predicting just one or two rate cuts this year, according to CME Group data, down from expectations of six or more at the start of the year. They are also betting that there will be no interest rate cuts this year.

But Brian Jacobsen, chief economist at Annex Wealth Management, expects inflation to moderate as U.S. households that have become “oversensitive to price increases” by companies slow their spending.

“The gigantic sucking noise of optimism (escaping) from the market is due to the Fed’s lack of foresight and irrational focus on where inflation has been rather than where it is going,” he said.

Since interest rates seem unlikely to help much in the short term, companies are under even more pressure to deliver profit growth. The recent price falls have cooled some criticism that stocks have become too expensive, but they won’t look cheap unless prices fall further or profits rise.

Netflix fell 9.1 percent despite reporting stronger-than-expected earnings for the latest quarter. Analysts called it a mostly solid performance, but the streaming giant disappointed some investors by saying it will stop providing updates on its subscriber numbers every three months starting next year.

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Helping to limit market losses was American Express, which rose 6.2 percent. It reported stronger earnings for the latest quarter than analysts expected. Fifth Third Bancorp rose 5.9 percent after also beating expectations.

All told, the S&P 500 fell 43.89 points to 4967.23. It is 5.5 percent below the record at the end of last month.

The Dow Jones Industrial Average rose 211.02 to 37,986.40, and the Nasdaq composite fell 319.49 to 15,282.01.

In the oil market, a barrel of Brent crude retreated to $87.29 after briefly rising above $90 overnight on concerns about fighting in the Middle East. Iranian forces fired air defenses at a major air base and a nuclear site in an apparent Israeli drone attack, raising concerns in the market. But crude oil prices pared their gains as traders wondered how Iran would respond.

In the bond market, 10-year Treasury yields fell to 4.62 percent from 4.64 percent late Thursday, capping gains for the week. The stock had fallen overnight as concerns mounted about a possible wider war in the Middle East.

In foreign markets, stock indexes were mixed in Europe after falling more sharply in Asia.

With AP

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