ASX slumps as Wall Street falls on rate concerns; Xero soars

“We believe this agreement strikes the right balance, with an extension to operations enabling Eraring to continue supporting security of electricity supply in New South Wales through the energy transition, while making compensation available to Origin in the event economic conditions for the plant are challenging,” said Origin chief executive Frank Calabria.

Overnight on Wall Street, the S&P 500 fell 0.3 per cent a day after setting its latest all-time high. The Dow Jones sank 0.5 per cent and the Nasdaq Composite slipped by 0.2 per cent.

Indexes had been close to flat early in the day, but they slunk lower after the Federal Reserve released the minutes of its last policy meeting. Discouragingly for markets, the minutes showed Fed officials suggesting it “would likely take longer than previously thought” to get inflation fully under control following disappointingly high readings at the start of the year.

And even though Fed Chair Jerome Powell said after that meeting that the Fed is more likely to cut rates than to hike them, the minutes said “various participants” were willing to raise rates if inflation worsens. That hit the rekindled hopes on Wall Street that the Fed will be able to cut its main interest rate at least once this year.

Nvidia, the chipmaker at the centre of an artificial intelligence boom, gave another bullish sales forecast after the closing bell, showing that spending on AI computing remains strong.

Second-quarter revenue will be about $US28 billion ($42.3 billion), the company said. Analysts on average had predicted $US26.8 billion, according to data compiled by Bloomberg. Results in the fiscal first quarter, which ran through April, also beat projections.

Nvidia shares were 7 per cent higher at 7.40am AEST in after-hours trading.

One of the market’s worst losses came from Target, which tumbled 8 per cent after the retailer reported profit for the latest quarter that fell short of analysts’ expectations. Earlier this week, Target said it was cutting prices on thousands of everyday basics to entice customers struggling with still-high inflation.

Lululemon Athletica sank 7.2 per cent after it said its chief product officer, Sun Choe, is leaving the company this month to “pursue another opportunity.” The company announced a new organisational structure where it won’t replace the role of chief product officer.

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On the bond market, the yield on the 10-year Treasury rose to 4.42 per cent from 4.41 per cent late Tuesday. The two-year yield, which moves more closely with expectations for the Fed, rose a bit more. It climbed to 4.87 per cent from 4.84 per cent.

Helping to keep the move in yields in check was the fact that the harsh talk in the minutes from the Fed’s latest meeting was from May 1. That was before some reports showed softening in inflation and certain parts of the US economy, which may have changed the minds of some Fed officials.

In recent speeches since that May 1 meeting, some Fed officials have indeed called those recent reports encouraging. But they have also said they still need to see months more of improving data before they could cut the federal funds rate, which is sitting at its highest level in more than 20 years.

The Fed is trying to pull off a tightrope walk where it slows the economy just enough through high interest rates to get inflation under control but not so much that it causes a bad recession.

High rates have made everything from credit-card bills to auto-loan payments more expensive. Mortgage rates are also high, and a report on Wednesday showed sales of previously occupied homes were weaker last month than economists expected.

Central banks around the world seem eager to cut interest rates, but “they may not go far” given how well economies are doing and how high inflation still is, according to Athanasios Vamvakidis, a strategist at Bank of America. He said in a BofA Global Research report that he expects only shallow cuts to interest rates, which may also come later than financial markets seem to be forecasting.

In other international markets, indexes were modestly lower across much of Europe and Asia.

London’s FTSE 100 sank 0.5 per cent after the UK Office for National Statistics announced a stronger-than-expected inflation reading that hurt hopes for a rate cut in June. Tokyo’s Nikkei 225 fell 0.8 per cent after Japan reported its trade deficit rose last month.

With AP, Bloomberg