ASX Set to Edge Higher as Wall Street Takes a Breather

On January 17, 2025, the US stock markets are experiencing a lull, drifting after a series of mixed earnings reports from major companies such as Morgan Stanley and UnitedHealth Group. This has resulted in a varied performance among the stock indexes.

Market Performance Overview

The S&P 500 index has risen by 0.1% in afternoon trading after fluctuating between small gains and losses earlier in the day. The Dow Jones Industrial Average increased by 28 points, which is also a 0.1% rise. However, the Nasdaq composite has dipped by 0.2%. In Australia, the share market appears to be on the rise as futures are indicating a gain of 14 points, translating to a 0.2% increase at market open. Notably, the ASX saw a strong surge of 1.4% on Thursday.

Wall Street Stability and Economic Indicators

Wall Street seems to be treading water following a significant surge the previous day. The market appears steadier after a notable jump driven by hopes that recent positive reports on inflation could lead the Federal Reserve to consider interest rate cuts in the upcoming year. The bond market has also seen Treasury yields remaining stable, following a mix of economic reports released on Thursday.

Economic indicators revealed that retail sales growth in the US was weaker than anticipated last month. Additionally, more Americans filed for unemployment benefits, while a separate report indicated that manufacturing in the mid-Atlantic region unexpectedly returned to growth. The combined insights from these reports suggest that while the US economy is not on the brink of recession, signs of a slowdown could lessen inflationary pressures.

Interest Rates and Treasury Yields

Traders have been adjusting their expectations regarding the Federal Reserve's potential actions concerning interest rates for 2025, resulting in fluctuating market performance. When inflation concerns ease, market expectations of rate cuts typically rise, leading to lower Treasury yields and higher stock prices. Conversely, if inflation presents an ongoing issue, yields tend to increase, putting pressure on stock prices.

Currently, the yield on the 10-year Treasury note has dropped slightly to 4.61% from 4.66% late on Wednesday. This yield has shown fluctuations but remains below the higher 4.79% recorded earlier in the week. In a similar vein, the two-year Treasury yield, which closely aligns with expectations for Fed announcements, decreased to 4.23% from 4.27%.

Corporate Earnings and Stock Movements

Among the prominent movements on Wall Street, Morgan Stanley shares climbed 2.8% following a stronger-than-expected earnings report. The CEO highlighted improvements in investment banking activities, and the company's wealth management business saw its total client assets grow to $7.9 trillion.

Other notable corporates such as Bank of America also reported profits that exceeded expectations on Thursday, but its stock experienced a slight decline of 1.6%. Meanwhile, US Bancorp's earnings fell short of analysts' forecasts, leading to a significant drop of 5.6% in its stock price.

On the downside, UnitedHealth Group experienced a stock decline of 4.6%. Although its profit exceeded expectations, revenue fell short, primarily due to an unexpected increase in medical costs. Additionally, this was the company’s first report since a troubling incident involving one of its executives.

Global Market Trends

In other markets, indices across Europe and Asia showed positive movements. For instance, France’s CAC 40 surged by 2.1%, South Korea’s Kospi increased by 1.2%, and Hong Kong's Hang Seng also rose by 1.2%. Significant news emerged from Taiwan, where the leading semiconductor manufacturer, Taiwan Semiconductor, reported a remarkable 57% profit increase driven by the AI market boom, further boosting chip-related stocks in the US.

ASX, Markets, Earnings