ASX dips as tech falls counter buoyant energy stocks

JB Hi-Fi shares surged as the retailer posted record sales for the financial year. By lunchtime, they are 4.8 per cent higher at $42.84.

The lifters: Mesoblast 11.7%, Pendal Group 4.4%, Life360 4.2%

The laggards: Hub24 -5.2%, Suncorp Group -4.8%, Wisetech Global -4%

Stocks closed lower on Wall Street on Monday after an early rally evaporated by mid-afternoon, marking a choppy start to a week full of updates on the two things that set stock prices: how much profit companies are making and where interest rates are heading.

The S&P 500 fell 0.8 per cent after having been up 1 per cent in the early going, The index broke a five-day losing streak at the end of last week. Gains in energy producers, big retailers and other companies that rely on consumer spending were outweighed by a pullback in health care and technology stocks. Goldman Sachs rose after reporting better profit for the spring than expected.

The Dow Jones Industrial Average fell 0.7 per cent and the Nasdaq composite lost 0.8 per cent.

“It was a pretty big gain earlier today, and it’s all gone,” said Liz Young, head of investment strategy at SoFi.

Young expects the market to remain volatile through July, mainly because of earnings season. Johnson & Johnson, American Airlines and Tesla are among the dozens of S&P 500 companies that are scheduled to issue quarterly snapshots this week.

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“This is the first earnings season in the cycle where we’re probably going to get some pretty negative guidance and we’re going to hear about where companies are being squeezed and they’re going to be changing their outlook,” she said.

The S&P 500 fell 32.31 points to 3,830.85. The Dow slid 215.65 points to 31,072.61, and the Nasdaq gave up 92.37 points to 11,360.05. The Russell 2000 index of smaller companies also fell. It dropped 5.96 points, or 0.3 per cent, at 1,738.42.

The afternoon reversal is the latest bout of volatile trading for the market, which has been lurching mostly lower for weeks on worries that the Federal Reserve and other central banks around the world will slam the brake too hard on the economy in hopes of bringing down high inflation. If they’re too aggressive with their interest-rate hikes, they could cause a recession.

“The Fed wants inflation data to come down and it’s not going to retract its claws until that happens,” Young said. “Pretty quickly the narrative is going to shift to, ‘will the Fed go too far?‘”

Still, some on Wall Street are seeing signs for at least temporary optimism. Oil prices have come off their highs, though US crude rose 5.1 per cent on Monday. A key report released last week also indicated expectations are easing for inflation among households. That could prevent a more vicious cycle from taking root and ease the pressure on the Federal Reserve.

Expectations have come down for how aggressively the Federal Reserve will raise interest rates at its meeting next week. Traders are now betting on a roughly one-in-three chance for a monster hike of a full percentage point, with the majority favouring a 0.75 percentage point increase. As recently as Thursday, the heavy bet was on a hike of a full point.