Banks, miners weigh on ASX after shaky day on Wall Street

The Australian sharemarket has slid at the open after a shaky day of trading on Wall Street.

The S&P/ASX 200 was 40.5 points, or 0.5 per cent, lower to 8661.5 in early trade. The ASX lost 0.7 per cent on Thursday. The Australian dollar was weaker at US70.08¢.

The S&P 500 finished nearly flat and edged down by less than 0.1 per cent following several turns between losses and gains. The Dow Jones Industrial Average dropped 161 points, or 0.3 per cent, and the Nasdaq composite added less than 0.1 per cent.

Stocks have slowed their rally since the S&P 500 climbed to the brink of its all-time high earlier this week as pressure from the bond market has cranked higher.

The yield on the 10-year Treasury jumped to 5.20 per cent from 5.11 per cent late Wednesday and is back to where it was in 2007. High yields slow the overall economy by making it more expensive to borrow money, while also undercutting prices for stocks and other investments.

Yields climbed through the morning, which pushed stocks downward, until they took a sudden turn lower in the midday hours. The 10-year yield dropped from nearly 5.17 per cent to less than 5.13 per cent in about 20 minutes before ultimately turning higher again.

Yields once again were following the track of oil prices, which have been scattershot because of uncertainty about when the war with Iran will allow crude oil to flow freely again from the Middle East.

The price for a barrel of Brent crude in the most actively traded part of the market went from $US102 to roughly $US99 in a matter of minutes midday Thursday. It later rose to settle at $US100.22, up 2.1 per cent from the prior day.

It’s not just worries about expensive oil and inflation that have sent Treasury yields higher. The US economy continues to expand, which also supports yields.

On Thursday, a report showed fewer US workers applied for unemployment benefits last week and further strengthened expectations for the economy.

Such numbers could convince the Federal Reserve that the economy can withstand more hikes to short-term interest rates. The Fed raised its main interest rate last week for the first time in three years in hopes of slowing the economy and removing some of the fuel for inflation.

Traders now see better than a coin flip’s chance that the Fed could raise rates twice more by the end of the year, according to data from CME Group.

So far, the solid overall economy has helped US companies continue to deliver strong growth in profits. That in turn has helped their stock prices remain relatively strong despite worries about war, inflation and tariffs.

“The headlines have turned more ominous, but the underlying drivers of growth remain intact,” strategists at Barclays wrote in a report. “As long as AI-related investment, US corporate profitability, and consumer spending continue to beat expectations, the economy and markets seem capable of absorbing tighter central banks and higher rates.”

Stitch Fix became one of the latest US companies late Wednesday to report better quarterly results than analysts expected. But its stock nevertheless tumbled 21.6 per cent after it said “a more challenging consumer environment” could hold back its revenue growth this upcoming fiscal year.

Darden Restaurants, the company behind Olive Garden and LongHorn Steakhouse, fell 3 per cent after reporting a profit for the latest quarter that matched analysts’ expectations.

High yields in the bond market hurt prices for all kinds of stocks, and they often hit hardest on those seen as the most expensive. That puts the target on AI stocks, which soared for years in the frenzy around the technology.

Higher yields also make it more expensive for companies to borrow money to build AI data centers, which could slow their construction and restrain demand for AI chips.

Nvidia slipped 0.4 per cent and was the heaviest weight on the S&P 500.

On the winning side of Wall Street was Everpure. The data storage and management company’s stock jumped 11.2 per cent after it stood by its financial forecasts for this fiscal year and said it expects revenue growth to accelerate in the following one.

All told, the S&P 500 fell 1.90 to 7,704.13 points. The Dow Jones Industrial Average dropped 161.61 to 51,349.98, and the Nasdaq composite rose 3.34 to 26,939.37.

In stock markets abroad, indexes fell modestly around much of the world. A drop of 1.2 per cent in Shanghai and gain of 0.8 per cent in Tokyo were two of the bigger moves.