Wall Street wavers on US inflation report, ASX set to slip

Another report on inflation is looming on Friday, which will show how bad inflation was in July at the wholesale level. Then, more reports on inflation and one more on overall hiring for August will arrive before the Fed’s next meeting that ends September 20.

Treasury yields held relatively steady in the bond market after a report showed slightly more workers applied for unemployment benefits last week than expected. The number remains low compared with history, signalling the job market remains remarkably resilient despite much higher interest rates.

Fed officials would likely welcome some softening of the job market, which they would see as removing upward pressure on inflation.

The weekly data on unemployment claims, though, have given head fakes in the past about the trajectory of the job market, said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. That could mean the cuts to interest rates that investors really desire may be further off than hoped.

“The Fed may leave interest rates unchanged next month, but they’re not about to start cutting them,” Loewengart said.

Hikes to interest rates also take a notoriously long time to take effect, and the Fed’s past increases are likely still making their way through the system. If the last bit to get inflation down to the Fed’s target of 2 per cent is as tough as some economists expect, that could make things dicier than a swiftly rising stock market would seem to suggest.

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Big US companies, meanwhile, continue to report mostly better profits for the spring than analysts expected. That’s usually the case, and analysts had particularly low expectations coming into this reporting season. Higher costs for workers and other expenses are broadly eating into profit margins.

The Walt Disney Co. rose 4.6 per cent after saying it would raise prices for some of its streaming services in hopes of boosting profitability. The entertainment giant reported stronger profit for the spring than analysts expected but weaker revenue.

Capri Holdings, which owns the Michael Kors, Versace and Jimmy Choo brands, soared 55.9 per cent as Big Fashion continues to consolidate.

Tapestry, the company behind luxury handbag and accessories retailer Coach, said it was buying the company for roughly $US8.5 billion ($13 billion). The deal would put it in better position to take on big European rivals, such as LVMH. Tapestry fell 15.9 per cent.

In the bond market, the yield on the 10-year Treasury rose to 4.08 per cent from 4.01 per cent late Wednesday. It helps set rates for mortgages and other important loans.

The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.84 per cent from 4.80 per cent late Wednesday.

In stock markets abroad, indexes were higher in Europe and mixed in Asia.

Stocks in China held relatively steady after US President Joe Biden signed an order to block and regulate high-tech US-based investments going toward China.

Another report on inflation is looming on Friday, which will show how bad inflation was in July at the wholesale level. Then, more reports on inflation and one more on overall hiring for August will arrive before the Fed’s next meeting that ends September 20.

Treasury yields held relatively steady in the bond market after a report showed slightly more workers applied for unemployment benefits last week than expected. The number remains low compared with history, signalling the job market remains remarkably resilient despite much higher interest rates.

Fed officials would likely welcome some softening of the job market, which they would see as removing upward pressure on inflation.

The weekly data on unemployment claims, though, have given head fakes in the past about the trajectory of the job market, said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. That could mean the cuts to interest rates that investors really desire may be further off than hoped.

“The Fed may leave interest rates unchanged next month, but they’re not about to start cutting them,” Loewengart said.

Hikes to interest rates also take a notoriously long time to take effect, and the Fed’s past increases are likely still making their way through the system. If the last bit to get inflation down to the Fed’s target of 2 per cent is as tough as some economists expect, that could make things dicier than a swiftly rising stock market would seem to suggest.

Loading

Big US companies, meanwhile, continue to report mostly better profits for the spring than analysts expected. That’s usually the case, and analysts had particularly low expectations coming into this reporting season. Higher costs for workers and other expenses are broadly eating into profit margins.

The Walt Disney Co. rose 4.6 per cent after saying it would raise prices for some of its streaming services in hopes of boosting profitability. The entertainment giant reported stronger profit for the spring than analysts expected but weaker revenue.

Capri Holdings, which owns the Michael Kors, Versace and Jimmy Choo brands, soared 55.9 per cent as Big Fashion continues to consolidate.

Tapestry, the company behind luxury handbag and accessories retailer Coach, said it was buying the company for roughly $US8.5 billion ($13 billion). The deal would put it in better position to take on big European rivals, such as LVMH. Tapestry fell 15.9 per cent.

In the bond market, the yield on the 10-year Treasury rose to 4.08 per cent from 4.01 per cent late Wednesday. It helps set rates for mortgages and other important loans.

The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.84 per cent from 4.80 per cent late Wednesday.

In stock markets abroad, indexes were higher in Europe and mixed in Asia.

Stocks in China held relatively steady after US President Joe Biden signed an order to block and regulate high-tech US-based investments going toward China.