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The laggards
On the flip side, gold miner RED 5 is at the bottom of the index with an 6.1 per cent share slide, followed by CSIRO biomaterials spin-off Polynovo, which sank 5.8 per cent.
Paladin Energy closed 5.1 per cent lower after announcing it was acquiring Fission Uranium Corp.
Star Entertainment Group dipped 1.1 per cent as investors digested Monday’s sombre trading update that highlighted that high rollers are avoiding its three casinos and the high costs associated with its regulatory compliance.
The lowdown
Commenting on consumer spending, HSBC notes that the recent narrative in the market has been about weak consumption growth, due to higher inflation and high interest rates that have slowed down demand – but this might be turning around for the better.
“Looking forward, we see forthcoming tax cuts and budget-announced ‘cost-of-living’ initiatives supporting a pick-up in household disposable incomes and spending” in the second half of the year, HSBC chief economist Paul Bloxham said in a note to clients. “We expect this to support a modest upswing in consumer spending.”
Rising house prices could also help make homeowners feel wealthier and boost spending, although “weak consumer sentiment, post-pandemic consumer caution and increased saving by parents seeking to help their children buy housing may provide offsetting effects,” he said.
No doubt all eyes will be on the latest inflation data expected to be released on Wednesday, when the ABS publishes the consumer price index for May. Economists expect a 3.8 per cent rise in inflation, up from 3.6 per cent in April.
Overnight on Wall Street, the S&P 500 slipped 0.3 per cent to pull further from its record set last week. The drops for Nvidia and other winners of Wall Street’s artificial-intelligence boom pulled the Nasdaq composite down 1.1 per cent, while the Dow Jones rose 0.7 per cent.
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Stocks of oil-and-gas companies were among the strongest, as seven out of every 10 stocks in the S&P 500 rose. Exxon Mobil climbed 3 per cent, and oilfield services provider SLB gained 4 per cent as oil prices hung near their highest levels since April.
Financial companies were also strong. JPMorgan Chase added 1.3 per cent, and Wells Fargo climbed 1.6 per cent ahead of results coming later in the week for tests by the Federal Reserve of how big banks would fare in a recession.
But declines for a handful of high-profile stocks offset all of those gains, and the spotlight shone brightest on Nvidia’s 6.7 per cent tumble. It was a third straight drop for the chip company, which had rocketed 1,000 per cent higher since the autumn of 2022.
Nearly insatiable demand for Nvidia’s chips to power artificial-intelligence applications have been a big reason for the US stock market’s run to records recently, even as the economy’s growth slows under the weight of high interest rates. But the AI boom has been so frenzied that it’s raised worries about a possible bubble in the stock market and too-high expectations among investors.
Nvidia’s stock has been receding since it briefly overtook Microsoft as Wall Street’s most valuable last week, and it’s down nearly 13 per cent in just three days. Because Nvidia has become so massive in size, the movements for its stock carry extra weight on the S&P 500 and other indexes. It was the heaviest weight by far on the S&P 500 on Monday.
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Such a rotation among stocks could actually be a healthy sign for the market, as long as it can stay close to its records. Market watchers have been worried to see just Nvidia and a handful of other companies responsible for much of the S&P 500’s returns recently. They would prefer a market where many stocks are participating in the gains.
In the US bond market, Treasury yields eased a bit. The yield on the 10-year Treasury fell to 4.23 per cent from 4.26 per cent late Friday.
Wall Street is actually hoping for a slowdown in the economy, one that will take upward pressure off inflation and push the Federal Reserve to cut rates.
Goldman Sachs economist David Mericle said a rate cut could happen as soon as September if inflation reports like the one coming up on Friday turn out as expected.
The Fed just needs to make sure it cuts interest rates at the right time. If it waits too long, the economy’s slowdown could careen into a recession. If it’s too early, inflation could reaccelerate.