The Australian sharemarket experienced a downturn by midday following Wall Street’s overnight losses, driven by a decline in major technology stocks. The S&P/ASX 200 index fell by 11 points, or 0.1 percent, reaching 8817.3 by early afternoon. Despite this, six out of eleven industry sectors remained in positive territory, with energy stocks leading the charge. However, tech shares were the primary drag on the local market.
Financial stocks displayed mixed performances, with the big four banks showing varied results. National Australia Bank saw a 1.9 percent increase, recovering some of its losses from Thursday after releasing its financial results. Meanwhile, Commonwealth Bank and Westpac experienced declines of 1 percent and 0.5 percent, respectively, while ANZ Bank remained stable. Macquarie Group faced a significant drop of 7 percent after reporting a $1.7 billion profit, which fell short of market expectations.
Energy and Mining Sectors: A Mixed Bag
Energy stocks provided some support to the broader market as oil prices climbed. Woodside Energy rose by 1.5 percent, Ampol increased by 0.3 percent, and Santos saw a 0.6 percent gain. In contrast, mining stocks presented a mixed picture. Iron ore giants such as Rio Tinto, BHP, and Fortescue Metals Group faced declines, with Rio Tinto dropping 1.7 percent, BHP down 0.8 percent, and Fortescue falling 1.8 percent, as iron ore prices retreated. However, gold miners like Evolution Mining and Northern Star Resources experienced gains of 0.2 percent and 0.6 percent, respectively, as gold prices rose.
Tech Stocks Under Pressure
The technology sector mirrored Wall Street’s Nasdaq downturn, with significant declines in companies like WiseTech, Xero, and Life360, which fell 1.2 percent, 1.6 percent, and 2.3 percent, respectively, during early trading. The Australian dollar was trading at US64.76¢ as of 12:36 PM AEDT.
The tech sector has been a pivotal force in Wall Street’s recent volatility, with Thursday’s losses pushing major indices into negative territory for the week. If this trend continues, it could end a three-week winning streak for the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite.
Wall Street’s Struggles and Economic Uncertainty
On Wall Street, the S&P 500 fell by 1.1 percent, the Dow Jones Industrial Average dropped 398.70 points, or 0.8 percent, and the Nasdaq Composite declined by 1.9 percent. The most significant pressures came from influential stocks like Nvidia, which fell 3.7 percent, and Microsoft, which decreased by 2 percent. Amazon also contributed to the market’s decline, sliding 2.9 percent.
Corporate earnings and forecasts remain the focal point for Wall Street. The latest results and executive statements could provide insights into the economy’s condition amid limited data on inflation, employment, and retail sales due to the ongoing government shutdown.
This week has been tumultuous for major indices, which reached record highs the previous week. The broader sharemarket has had a record-setting year, raising concerns about potential overvaluation, particularly in large technology firms leading the market amid advancements in artificial intelligence.
Economic Indicators and Federal Reserve’s Dilemma
The current earnings season is closely watched to determine if the high valuations in the sharemarket are justified. These results also help fill in gaps left by the US government shutdown, which has become the longest on record. The absence of employment data for September and October, along with missing consumer price data, complicates the Federal Reserve’s decision-making process.
Private sector reports indicate mixed economic signals. According to ADP, private payrolls rose more than expected in October, and the Institute for Supply Management reported expansion in the services sector. However, job cuts surged by 175 percent in October compared to the previous year, as reported by Challenger, Gray & Christmas.
“We anticipate the Fed will continue to implement rate cuts to prevent any weakness in employment from accelerating,” said Seema Shah, chief global strategist at Principal Asset Management. “Much of the market’s optimism hinges on the assumption that policymakers will maintain some level of support.”
The Federal Reserve has already cut its benchmark interest rate twice this year and is expected to proceed cautiously. Wall Street predicts a 71 percent chance of another rate cut in December, down from over 90 percent before the most recent cut.
Global Market Reactions
The US government shutdown is also affecting airlines, with the Federal Aviation Administration planning a 10 percent reduction in air traffic across 40 “high-volume” markets starting Friday. This has already impacted airline stocks, with American Airlines falling 2 percent, Delta Air Lines down 1.2 percent, and United Airlines declining 1 percent.
In Europe, markets fell after the Bank of England’s decision to keep its main interest rate unchanged, highlighting divisions within the central bank.
