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The hope on Wall Street is that growth for the job market and economy continues to slow in order to take pressure off inflation, but not so much that it creates a deep recession.
Companies whose profits are most closely tied to the strength of the economy lagged the market Thursday following the reports, such as industrial companies and oil-and-gas producers.
Dave & Buster’s Entertainment sank 10.5 per cent after reporting worse drops in profit and revenue for the latest quarter than expected, citing a “complex macroeconomic environment” among other reasons. Other companies have recently been detailing a split among their customers, where lower-income households are struggling to keep up with still-high inflation.
Some companies have been able to skyrocket regardless of the pressures on the economy because of an ongoing frenzy around artificial-intelligence technology.
Broadcom jumped 12.6 per cent after the semiconductor company reported stronger profit for the latest quarter than analysts expected, aided once again by AI demand. It also raised its forecast for revenue this year.
Broadcom’s stock price has jumped so high, to nearly $US1700 ($2561), that it will soon give nine shares for every one that investors already hold in hopes of lowering the price and making it more affordable. It follows a similar move by Nvidia, which has become the poster child of the AI rush and seen its total market value top $US3 trillion ($4.5 trillion).
Tesla rose 4.1 per cent after CEO Elon Musk said early voting results indicate shareholders are about to approve his pay package. Without it, Musk had threatened to take AI research to one of his other companies.
In the bond market, the yield on the 10-year Treasury fell to 4.24 per cent from 4.32 per cent late Wednesday and from 4.60 per cent late last month. The two-year yield, which moves more on expectations for the Fed, fell to 4.69 per cent from 4.76 per cent.
Most Fed officials are penciling in either one or two cuts to interest rates this year, and traders are hopeful they can begin as soon as September, according to data from CME Group. Such cuts would ease the pressure on the economy and give a boost to all kinds of investment prices.
TIAA’s Mukherjee said he’s expecting the US economy’s growth to keep slowing as spending by lower-income households weakens under the strain of dwindling or emptied savings accounts. But he expects the economy to avoid a recession as spending continues by well-off households benefiting from fatter investment portfolios and home values, as well as by governments and corporations.
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“To me, the soft landing” for the economy where inflation eases without a deep recession “has already been achieved,” he said.
But he has muted expectations for stocks for the rest of the year after they’ve already gained so much. The S&P 500 has already jumped nearly 14 per cent. Plus, he points to the potential for shakiness in financial markets around upcoming elections, including the US presidential face-off.
European markets have gotten rocked after recent elections saw a surge in support for the far right in places like France and Germany. Volatility also hit markets recently after investors learned the election results in other countries, such as Mexico and India.
European stocks fell sharply Thursday as leaders of the Group of Seven leading industrialised nations gathered in Italy. France’s CAC 40 fell 2 per cent, and Germany’s DAX lost 2 per cent.
In Asia, Japan’s Nikkei 225 slipped 0.4 per cent ahead of a decision on interest rates by Japan’s central bank coming on Friday. Indexes rose in Seoul and Hong Kong.
AP
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