ASX set to retreat as tech giants push Wall Street lower

By Damian Troise and Alex Veiga July 28, 2021 â€" 5.31am

Drops in big technology companies led stocks broadly lower on Wall Street on Tuesday (US time), easing major indexes off the latest record highs they set a day earlier.

Markets have been choppy as investors try to get a clearer picture of how well the economy is recovering from the pandemic and how the Federal Reserve will eventually ease up on its support for low interest rates. The central bank is meeting on Tuesday and will release its latest statement on Wednesday.

Wall Street was sharply lower at lunch but pared some of its losses in the afternoon.Credit:AP

In late trade, the S&P 500 is 0.7 per cent lower. The benchmark index reached its latest record high on Monday and is now on pace for its first pullback in six days. The Dow Jones has shed 0.4 per cent and the tech-heavy Nasdaq has fallen by 1.4 per cent.

It sets up the Australian sharemarket for losses this morning, with futures at 5.11am AEST pointing to a fall of 26 points, or 0.4 per cent, at the open.

Technology companies and a mix of consumer-oriented companies were among the biggest losers. Microsoft fell 1.9 per cent and Apple fell 2 per cent. Both companies are set to report their latest results after the close of trading.

Investors shifted money to sectors seen as less risky, including utilities and companies that make household and personal goods.

They also bought bonds, sending the yield on the 10-year Treasury note down to 1.24 per cent from 1.27 per cent late Monday. Long-term yields have eased off from their sharp rise earlier in the year, but Wall Street is still worried about inflation.

Wednesday’s report from the Fed could give investors more clues about the central bank’s level of concern and when it might start reducing its monthly bond purchases that have helped keep interest rates low.

Investors considered a mixed bag of earnings from several large companies. UPS slumped 7.7 per cent after its revenue for the latest quarter fell short of analysts’ forecasts. Wall Street brushed off seemingly solid results from several other companies. Tesla fell 2.8 per cent and industrial conglomerate 3M fell 1 per cent, despite reporting solid financial results.

The backdrop for stocks “is still favourable, “said Terry Sandven, chief equity strategist at US Bank Wealth Management. “The weakness today is just part of the normal ebb and flow.”

The Conference Board reported that consumer confidence edged higher in July, marking the sixth straight month that the measurement has risen. The International Monetary Fund said it expects the global economy to expand 6 per cent this year, a dramatic bounce-back from the 3.2 per cent contraction in the pandemic year of 2020.

Part of the uncertainty hovering over markets has to do with COVID-19 and its potential impact on the recovery. Case numbers and hospitalisations have been ticking higher in certain parts of the US and world as the Delta variant spreads.

“The pace of growth is being questioned because of COVID-19 variants,” Sandven said. “There is some concern that the pace may not be as robust.”

The broad declines in the US follow more drops in China, where a regulatory clampdown on various companies is spooking investors. Hong Kong’s Hang Seng lost 4.2 per cent and the Shanghai Composite lost 2.5 per cent.

AP

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