The ASX looks like starting with gusto later this morning after a big end to the week on Wall Street on Friday.
Despite more jobs being created in May, Wall Street took the US jobs report for last month as a positive – a lift in the jobless rate to 3.7% from 3.4% the month before was given the thumbs up.
As well, wages growth slowed a smidge and hours worked eased, but on the other side there were 93,000 extra jobs found in March and April, on top of the 339,000 new jobs reported (80% more than the 190,000 forecast by the market).
This, plus the ending of the debt ceiling crisis, saw Wall Street surge and even though oil could come under pressure from a meeting of the OPEC+ group, there’s now a feeling that the Fed will sit on rates at next week’s meeting.
That would be very different to Australia where the Reserve Bank is now widely tipped to lift rates at its June meeting tomorrow with more analysts and economists changing their minds and forecasting an increase of 0.25%.
The Dow surged Friday for its best day since January as traders cheered a strong jobs report and the passage of a debt ceiling bill that averts a US default.
The 30-stock Dow jumped 701.19 points, or 2.12%, to end at 33,762.76. The S&P 500 climbed 1.45% to close at 4,282.37. The Nasdaq advanced 1.07% to 13,240.77, touching its highest level since April 2022 during the session.
With Friday’s gains, the S&P 500 and Nasdaq finished the holiday-shortened trading week about 1.8% and 2% higher, respectively.
The Dow’s Friday advance pushed it into positive territory for the week, finishing up 2%. The Nasdaq’s weekly rise was its sixth straight weekly gain, a streak not seen for the technology-heavy index since 2020.
Besides the solid gain for US shares rose, Eurozone shares edged up 0.04%, Japanese shares rose 2% (to new multi-year lows) and Chinese shares rose 0.3%.
But bond markets settled after the debt ceiling deal was passed by the US Senate and then signed off by President Biden.
The yield on the 10-year Treasury climbed to 3.69% from 3.60% late Thursday. The two-year Treasury yield, which moves more on expectations for Fed action, jumped to 4.50% from 4.34%.
The ASX 200 was up 34.3 points, or 0.5% on Friday, at 7,145.1 at the close.
That saw Australian shares lose just 0.1% for the week, though with increasing expectations for further RBA rate hikes with falls led by consumer, financial and energy shares.
Bond yields and the oil price fell but metal and iron ore prices rose as did the $A on the back of increased RBA rate hike expectations and a softer greenback.
Among the big caps on Nasdaq, Tesla led the way with an 11% increase for the week. Shares of the electric vehicle maker are now up 74% for the year after losing roughly two-thirds of their value in 2022.
AI chip group Nvidia ran out of steam last week – the shares managed a gain of 0.98% – a fraction of the previous week’s 20% plus surge (more than 24% on May 25).
But Nvidia shares are up 169% so far this year and that, alongside gains for the likes of Tesla and Apple, have helped pull the Nasdaq up 27% in 2023, far outpacing the S&P 500 and Dow Jones Industrial Average.
After peaking in late 2021, the Nasdaq slumped 33% last year, its steepest drop since the financial crisis, on concerns surrounding inflation and rising interest rates. The index is still about 18% off its all-time high.
The surge in Nvidia shares and chat about AI obscured an all-time high on Friday for Apple – the shares ended at $US180.95 and touched a day and year’s high of $US181.11.
The previous all-time high Apple stock closing price was $US180.43 on January 3, 2022.
That was a gain of 0.48% for the day and 3.5% for the week and took Apple’s market value to a new high of $US2.83 trillion.
Apple reportedly will release a new virtual reality headset on Monday.
The US is not out of the fiscal doghouse with Fitch, as the ratings firm said government debt is still on a watch for a possible downgrade despite the debt ceiling deal.
“Reaching an agreement despite heated political partisanship while reducing fiscal deficits modestly over the next two years are positive considerations,” Fitch said in a release.
“However, Fitch believes that repeated political standoffs around the debt-limit and last-minute suspensions before the x-date (when the Treasury’s cash position and extraordinary measures are exhausted) lowers confidence in governance on fiscal and debt matters.”
The firm cited a “steady deterioration in governance over the last 15 years” as reasons for its pessimistic outlook and said it will “resolve” the credit watch status in the third quarter of 2023.
Moody’s on Thursday said it is not considering the US for a downgrade but Fitch’s stance is the same as the one S&P Global has had for the US since 2011 (either a negative or stable outlook).