The numbers
Consumer discretionary stocks and real estate investment trusts (REITs) fell sharply after higher-than-expected inflation data raised the odds that the Reserve Bank might consider raising rates instead of much-hoped-for rate cuts.
Nvidia helped drive Wall Street higher.Reuters
The S&P/ASX 200 Index fell 55.8 points,or 0.7 per cent,to 7,783.0 points at the close,with eight out of the eleven sectors on the local bourse closing in the red.
The monthly consumer index (CPI) lifted 4 per cent over the year to May,up from 3.6 per cent measured in April and more than the 3.8 per cent predicted by economists. As a result,investors are lowering their expectations that we might see a rate cut this year.
A shock surge has pushed inflation up to its highest level this year.
The lifters
Information technology stocks (up 0.8 per cent) defied the cautious sentiment among investors following the inflation data,with WiseTech (up 2 per cent) and accounting software company Xero (up 1.1 per cent) both among the biggest large-cap advancers. It comes after a rebound of AI giant Nvidia on the US bourse overnight.
Energy companies (up 0.5 per cent) were also stronger,with oil heavyweight Woodside (up 1.3 per cent) lifting the sector along with Santos (up 0.4 per cent).
Meridian Energy (up 6.3 per cent) was the biggest large-cap advancer. Asset management firm GQG Partners (up 3.4 per cent) and Mercury NZ (up 4.4 per cent) also rose.
The laggards
The inflation data hit consumer stocks the hardest,with Harvey Norman shedding 8.3 per cent and competitor JB Hi-Fi sliding 2.6 per cent. Wesfarmers (down 2.2 per cent) was also weaker.
Miners (down 0.6 per cent) and interest-rate-sensitive REITs (down 2 per cent) were also sharply lower. Iron ore giants Rio Tinto and Fortescue Metals Group shed 0.2 per cent and 0.4 per cent,respectively,while gold miners Northern Star (down 3.4 per cent) and Newmont (down 3.2 per cent) both declining.
Westfield shopping centres owner Scentre fell 2.2 per cent,and property fund Stockland shed 2.9 per cent.
The big four banks were also down,with CBA,the nation’s largest bank,losing 1.3 per cent. ANZ Group (down 1.3 per cent),National Australia Bank (down 1.1 per cent) and Westpac (down 0.6 per cent) also declined.
The big four banks were down.Dominic Lorrimer
The lowdown
Betashares chief economist David Bassanese described the inflation data as a “shocker”. “It places enormous pressure on the Reserve Bank to not only not cut interest rates anytime soon,but potentially lift them further,” he said.
The Reserve Bank has said it is most focused on the quarterly inflation result that will be released at the end of next month.
Capital.com senior financial market analyst Kyle Rodda said the hot inflation data put an August RBA rate hike in play. “It’s the third successive rise in the inflation indicator and suggests the official quarterly number will come in above the current 3.6 per cent forecast and where the RBA projected it ought to be by the end of the June quarter,” he said.
On Wall Street overnight,the S&P 500 rose 0.4 per cent and neared its all-time high set a week earlier,while the Nasdaq composite leaped 1.3 per cent for its first gain in four days. Such strength came even as most stocks outside Wall Street’s frenzy around artificial-intelligence technology fell.
The Dow Jones,which doesn’t include Nvidia among its members,was a laggard and sank 0.8 per cent.
Nvidia climbed 6.8 per cent,and without that gain,the S&P 500 would have dropped to a loss for the day. The chip company’s shares snapped where they had lost nearly 13 per cent for their worst such stretch since 2022.
It’s just one stock,but Nvidia has the power to swing the S&P 500 around because it’s grown to become one of Wall Street’s largest and most influential companies.
Voracious demand for Nvidia’s chips to power artificial-intelligence applications has been a big reason for the US stock market’s run to records recently,even as the economy’s growth slows under the weight of high interest rates. But the AI boom has been so frenzied that it’s raised worries about a possible bubble in the stock market and too-high expectations among investors.
Focus on markets is starting to swing toward growth and away from just inflation and interest rates,according to Michael Wilson and other strategists at Morgan Stanley.
Pool Corp,a US distributor of swimming pool supplies,tumbled 8 per cent after it said construction of new pools is falling amid “cautious consumer spending on big ticket items” and cut its financial forecasts for the year.
It was the worst performer in the S&P 500,but Pool wasn’t alone. Three out of every four stocks in the index fell.
In the bond market,Treasury yields held relatively steady. The yield on the 10-year Treasury remained at 4.23 per cent,where it was late Monday.
The Fed has been keeping the federal funds rate at the highest level in more than 20 years,hoping to grind down on the US economy just enough to get inflation under control.
The hope on Wall Street is that the Fed will cut interest rates at the exact right time. If it waits too long,the slowdown in the world’s largest economy could careen into a recession. If it’s too early,inflation could re-accelerate.
Tweet of the day
Quote of the day
“McCann’s experience in navigating the complexities of remediation will serve The Star well as it prepares for the challenges ahead,” said a spokesperson for the NSW regulator.
Star Entertainment Group has signed on to helm the struggling casino operator from July 8 after weeks of negotiations.
You may have missed
Big banks,retail giants and Australia Post have agreed to a for the struggling cash transit business Armaguard,in a move aimed at securing cash supplies for at least the next year.
With AP
The Market Recap newsletter is a wrap of the day’s trading..