This article was added by the user . TheWorldNews is not responsible for the content of the platform.

ASX set to drop as Wall Street slumps; US sues Amazon

Wall Street’s ugly September got even worse Tuesday, as a sharp drop for stocks brought them back to where they were in June.

The S&P 500 tumbled 1.5 per cent for its fifth loss in the last six days. The Dow Jones dropped 1.1 per cent, and the Nasdaq composite lost 1.6 per cent. The Australian sharemarket is set to slide, with futures at 6.59am AEST pointing to a drop of 24 points, or 0.3 per cent, at the open. The ASX shed 0.5 per cent on Tuesday.

Wall Street is on track for its worst month of the year.

Wall Street is on track for its worst month of the year.Credit: Reuters

September has brought a loss of 5.2 per cent so far for the S&P 500, putting it on track to be the worst month of the year by far, as the realisation sets in that the Federal Reserve will indeed keep interest rates high for a long time. That growing understanding has sent yields in the bond market to their highest levels in more than a decade, which in turn has undercut prices for stocks and other investments.

Treasury yields rose again Thursday following a mixed batch of reports on the economy.

The yield on the 10-year Treasury edged up to 4.55 per cent from 4.54 per cent late Monday and is near its highest level since 2007. It’s up sharply from about 3.50 per cent in May and from 0.50 per cent about three years ago.


The rise in yields means bonds “now seem reasonable after a long time, but stocks still do not,” according to strategists at Barclays led by Ajay Rajadhyaksha.

One economic report on Tuesday showed confidence among consumers was weaker than economists expected. That’s concerning because strong spending by US households has been a bulwark keeping the economy out of a long-predicted recession.

A separate report said sales of new homes across the country slowed by more last month than economists expected, while a third report suggested manufacturing in Maryland, the Virginias and the Carolinas may be steadying itself following a more than yearlong slump.

While housing and manufacturing have felt the sting of high interest rates, the economy overall has held up well enough to raise worries that upward pressure still exists on inflation. That pushed the Fed last week to say it will likely cut interest rates by less next year than earlier expected. The Fed’s main interest rate is at its highest level since 2001 in its drive to get inflation back down to its target.

Besides high interest rates, a long list of other worries is also tugging at Wall Street. The most immediate is the threat of another US government shutdown as Capitol Hill threatens a stalemate that could shut off federal services across the country.

Wall Street has dealt with such shutdowns in the past, and stocks have historically been turbulent in the runup to them, according to Lori Calvasina, strategist at RBC Capital Markets.

After looking at the seven shutdowns that lasted 10 days or more since the 1970s, she found the S&P 500 dropped an average of roughly 10 per cent in the three months heading into them. But stocks managed to hold up rather well during the shutdowns, falling an average of just 0.3 per cent, before rebounding meaningfully afterward.

Besides the threat of higher interest rates for longer, Wall Street is also contending with higher oil prices, shaky economies around the world, a strike by US auto workers that could put more upward pressure on inflation and a resumption of US student-loan repayments that could dent spending by households.

On Wall Street, the vast majority of stocks fell Tuesday under such pressures, including 90 per cent of those within the S&P 500.

Big Tech stocks tend to be among the hardest hit by high rates, and they were the heaviest weights on the index. Apple fell 2.3 per cent and Microsoft lost 1.7 per cent.

Amazon tumbled 4 per cent after the Federal Trade Commission and 17 state attorneys general filed an antitrust lawsuit against it. They accuse the e-commerce behemoth of using its dominant position to inflate prices on other platforms, overcharge sellers and stifle competition.

Cintas dropped 5.3 per cent for the largest loss in the S&P 500. The provider of employee uniforms, mops, fire extinguishers and other services reported stronger profit for its latest quarter than analysts expected. It also raised its forecast for profit for the full fiscal year, but still within a range that many analysts earlier expected.

Stocks fell in markets around the world, with indexes lower across Asia and much of Europe.

Japan’s Nikkei 225 fell 1.1 per cent, South Korea’s Kospi dropped 1.3 per cent and Hong Kong’s Hang Seng lost 1.5 per cent.


In China, concerns continued over heavily indebted real estate developer Evergrande. The property market crisis there is dragging on China’s economic growth and raising worries about financial instability.

France’s CAC 40 fell 0.7 per cent, and Germany’s DAX lost 1 per cent.

Crude oil prices rose, adding to worries about inflation. A barrel of benchmark US crude climbed 71 cents to $US90.39. Brent crude, the international standard, added 67 cents to $US93.96 per barrel.