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ASX set for morning tumble as traders anticipate jobs data

ASX set for morning tumble as traders anticipate jobs data

To be sure, Friday’s jobs report may not be as strong as it seems on the surface. While the overall number of hires in December exceeded expectations, “manufacturing is still getting crushed,” said Brian Jacobsen, chief economist at Annex Wealth Management.

“The macroeconomy may be fine,” he said, “but each individual’s microeconomy could look very different.”

The raises in pay that workers are getting are also an important data point for the Fed, and gains in average hourly earnings were below 4 per cent last month. That’s what “the Fed wants to see,” according to Wells Fargo Investment Institute Senior Global Market Strategist Scott Wren.

The nuanced takes helped Treasury yields give back some of their initial bursts following the release of the jobs report. But preliminary results from a separate report later in the morning underscored the issue. It suggested US consumers are getting more pessimistic about where inflation is heading.

The problem for Wall Street is that when traders were sending US stock indexes to dozens of records last year, they were banking on a stream of rate cuts coming from the Fed. If fewer cuts materialise than expected, stock prices would likely either need to fall, or profits at companies would have to rise more strongly to make up for it.

Smaller companies can take worse hits from higher interest rates than their bigger rivals because of the need for many to borrow to grow. The Russell 2000 index of smaller stocks slumped 2.2 per cent.

Insurance companies were also under pressure as wildfires continue to burn in the Los Angeles area. Many of the homes that have been destroyed were in expensive areas, where the typical price can top $3 million, and such high-priced damage could eat into insurers’ profit. Allstate fell 5.6 per cent, Travelers dropped 4.3 per cent and Chubb lost 3.4 per cent.

A growing minority of traders on Wall Street are saying the Fed, led by Jerome Powell, may not cut rates again at all in 2025.Credit: Bloomberg

Delta Air Lines was able to fly 9 per cent higher because it delivered a stronger profit report for the last three months of 2024 than analysts expected. The airline said it’s seeing strong demand for travel, which accelerated through the end of last year, and it expects that to continue into 2025.

Big banks will begin reporting their own results for the end of 2024 next week, as earnings season gets under way in earnest.

All told, the S&P 500 fell 91.21 points to 5,827.04. The Dow Jones Industrial Average dropped 696.75 to 41,938.45, and the Nasdaq composite sank 317.25 to 19,161.63.

In the bond market, the yield on the 10-year Treasury jumped to 4.76 per cent from 4.68 per cent late Thursday. In September, it was below 3.65 per cent, marking a major move for the bond market.

Friday’s jobs report means traders see it as a near certainty that the Fed will not cut interest rates at its next meeting later this month. That would be the first time it’s stood pat following three straight cuts to interest rates.

A growing minority of traders on Wall Street are saying the Fed may not cut rates again at all in 2025.

AP