Stan Choe
US stocks are drifting lower in their return to trading from a three-day weekend.
The S&P 500 fell 0.4 per cent. The Dow Jones Industrial Average was down 517 points, or 1 per cent, in mid-afternoon trade, and the Nasdaq composite was 0.2 per cent lower.
The Australian sharemarket is set to rise, with futures at 4.52am AEST pointing to a gain of 15 points, or 0.2 per cent, at the open. The ASX shed 1 per cent on Tuesday. The Australian dollar was trading at US72.22¢.
US stocks felt pressure from oil prices, after a barrel of Brent crude briefly climbed as high as $US99.46. It later gave back most of its gain and was most recently up 0.1 per cent at $US97.05. It’s nevertheless jumped from roughly $US72 since early July as increased fighting in the Middle East keeps the global flow of oil constricted.
More expensive oil has worsened worries about the high inflation weighing on people and companies across the country, which gives extra heft to a couple reports coming later this week. On Thursday, the US government will release its August report for inflation at the wholesale level, which economists expect will show an acceleration to 5.4 per cent from 4.7 per cent in July.
The more closely watched report on inflation that US consumers are feeling will arrive on Friday. That update will show how much more people are paying for groceries, clothes and other costs of living, and economists expect it eased a bit to 3.3 per cent from July’s 3.4 per cent inflation rate. That, though, remains well above the 2 per cent target that the Federal Reserve has set as its goal.
This week’s updates on inflation will be the last before the Fed meets next week to decide whether to cut, raise or hold interest rates steady. The traditional move for the Fed when inflation is high is to raise its main interest rate. That in turn would filter out into the rest of the bond market, make it more expensive for companies and people to borrow, slow the overall economy, undercut prices for investments and hopefully rein in inflation.
But President Donald Trump has been lobbying for lower interest rates instead, which could give the economy — and inflation — an extra kick. The Fed’s new chairman, Kevin Warsh, has meanwhile said he wants to give financial markets fewer clues about what the Fed plans to do with interest rates in the short term.
That all has traders betting on a 60 per cent probability the Fed will raise its federal funds rate at the conclusion of its next meeting on Sept. 16, according to data from CME Group.
In the bond market, the yield on the 10-year Treasury inched up to 4.79 per cent from 4.78 per cent and remains near its highest level since the autumn of 2023.
Higher Treasury yields put more pressure on companies to grow their profits in order to lift their stock prices.
On Wall Street, Boston Scientific fell 4.6 per cent after saying that a network outage earlier this summer caused by a cybersecurity incident means that it’s unlikely to meet forecasts it gave for sales and profit for the third quarter and for the fully of 2026. It expects to make back some of the revenue as it continues to ramp operations globally, fulfil customer orders and reduce remaining backlogs, but it doesn’t yet know the full impacts.
Shares of Novartis that trade in the United States tumbled 13.9 per cent after the Swiss pharmaceutical company gave a discouraging update on a study of a therapy for people living with myotonic dystrophy type 1, a neuromuscular disease.
Qualcomm helped limit the market’s losses after rising 2.9 per cent. It announced a deal to collaborate with Amazon on large-scale AI data centres. The deal also gives Amazon the right to acquire up to 25 million of Qualcomm’s shares at $US161.26 per share.
In stock markets abroad, Japan’s Nikkei 225 sank 1.7 per cent under the weight of losses for major exporters, which were hurt by more rises for the value of the Japanese yen against the US dollar.
A stronger yen erodes the value of sales made in US dollars when Toyota Motor, Panasonic Holdings and other Japanese exporters have to translate them back into yen. The Bank of Japan is also scheduled to meet next week on interest rates, and speculation is climbing that it could raise rates.
In China, indexes fell 0.4 per cent in Hong Kong and rose 0.2 per cent in Shanghai after the world’s second-largest economy said its exports jumped 25 per cent year-on-year in August, driven by strong demand for autos and high-tech items.
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