Wall Street steadies, ASX set to gain

Cuts to interest rates not only make borrowing easier for US households and companies, they also encourage investors to pay higher prices for stocks and other investments. Stock prices have already leaped in part on such expectations.

US stocks have remained near records despite diminishing expectations for rate cuts this year because of the hope that the strong economy will drive profits for companies. Profits and interest rates are the two main levers that set stock prices.

Such hopes have helped the stock market’s gains broaden out beyond the handful of Big Tech stocks responsible for the majority of last year’s gain. Energy producers in the S&P 500 have jumped nearly 17 per cent this year, after dropping nearly 5 per cent last year, on expectations that a recent rebound in energy prices will mean fatter profits in the future.

It’s also possible that the US economy can continue to post both strong growth while inflation cools. That’s what Goldman Sachs economist David Mericle is forecasting, in part because of elevated immigration of younger people who are working in construction and other industries that generally earn lower wages.

Friday’s surprisingly strong jobs report showed that workers’ average hourly wages were behaving as expected, even though employers hired far more workers than expected last month.

But critics say stock prices already look expensive given their huge run of more than 20 per cent from November into March. That means “achieving ambitious earnings forecasts has become paramount,” according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

“Economic growth is good, but complacency around its implications is not,” she said.

To that end, this week will bring the start of the latest earnings reporting season. Delta Air Lines, JPMorgan Chase and other banks will headline the earliest days of the reporting period. Analysts are expecting companies across the S&P 500 to deliver a third straight quarter of growth from the prior year.

Real-estate investment trusts were leading the market after Apartment Income REIT said Blackstone agreed to buy it for about $US10 billion ($15 billion) in cash, including assumed debt. Apartment Income REIT, which also goes by AIR Communities, jumped 22.5 per cent.

On the losing end of Wall Street was Trump Media & Technology Group. The company behind the Truth Social platform has seen its stock price swing sharply by the day, as experts say it’s moving more on hopes of Trump fans than on the profit prospects of the company. It sank 10.9 per cent.

In the bond market, Treasury yields were rising to add to their gains for the year so far on diminished expectations for cuts to rates. The yield on the 10-year Treasury ticked up to 4.42 per cent from 4.40 per cent late Friday and less than 3.90 per cent at the start of the year.

In stock markets abroad, indexes mostly rose across Europe and Asia, though stocks fell 0.7 per cent in Shanghai.

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