ASX set to slide, Wall Street drifts ahead of expected rate cut

US stocks are hanging around their record heights as the countdown ticks toward what Wall Street expects will be the first cut of the year to interest rates by the Federal Reserve.

The S&P 500 fell 0.1 per cent, coming off its latest all-time high. The Dow Jones was down 120 points, or 0.3 per cent, in mid-afternoon trade, and the Nasdaq composite was 0.1 per cent lower.

Wall Street is expecting a rate cut this week. Credit: AP

The Australian sharemarket is set to slide, with futures at 5.11am AEST pointing to a fall of 36 points, or 0.4 per cent, at the open. The ASX added 0.3 per cent on Tuesday. The Australian dollar was stronger at US66.83¢ at 5.27am AEST.

Stocks have run to records on expectations that the Fed will announce the first of a series of cuts to rates on Wednesday afternoon in hopes of giving the economy a boost. The job market has slowed so much that traders believe Fed officials now see it as the bigger danger for the economy than the threat of higher inflation because of President Donald Trump’s tariffs.

The Fed has been holding off on cuts to rates because inflation has remained above its 2 per cent target, and easier interest rates could give it more fuel.

A report on Tuesday said shoppers increased their spending at US retailers by more last month than economists expected. A chunk of that could simply be due to shoppers having to pay higher prices for the same amount of stuff. But it could also indicate solid spending by US households could continue to keep the economy out of a recession.

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The data did little to change traders’ expectations for a cut to interest rates on Wednesday, followed by more through the end of the year and into 2026.

Such high expectations have sent stocks to records, but they can also create disappointment if unfulfilled. That’s why more attention will be on what Fed chair Jerome Powell says in his press conference following Wednesday’s decision than on the decision itself. Fed officials will also release their latest projections for where they see interest rates and the economy heading in upcoming years, which could provide another potential flashpoint.

For now, global fund managers are tilting their portfolios toward stocks at the highest level in seven months, according to the latest survey by Bank of America. That’s even though a record 58 per cent of them are also saying that stocks look too expensive at the moment.

On Wall Street, Dave & Buster’s fell 16.2 per cent after the entertainment chain reported a weaker profit for the latest quarter than analysts expected.

Ralph Lauren slipped 0.5 per cent and got a tepid reception to the unveiling of its long-term financial plan, which it titled “Next Great Chapter: Drive.” As part of it, the company said it expects compounded annual growth over the next three years to be in the mid-single digit percentages for revenue.

New York Times Co. fell 1.8 per cent after Trump filed a $US15 billion ($22.5 billion) defamation lawsuit against the newspaper and four of its journalists on Monday. The lawsuit points to several articles and a book written by Times journalists and published in the lead up to the 2024 election as “part of a decades-long pattern by the New York Times of intentional and malicious defamation against President Trump.”

On the winning end of Wall Street was Steel Dynamics, which climbed 6.9 per cent after it said it’s seeing improved earnings across its three business units. It credited strong demand for steel from the non-residential construction and auto industries, among other things.

Oracle rose 0.9 per cent on speculation that it could be part of a deal that would keep TikTok operating in the United States.

Chipotle Mexican Grill added 1.7 per cent after its board said the company could buy back an additional $US500 million of its stock. Such a move can send cash directly to investors and boost per-share results.

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In stock markets abroad, indexes fell in Europe following a mixed showing in Asia.

Japan’s Nikkei 225 added 0.3 per cent to finish at another record. The rally comes despite political uncertainty after Japanese Prime Minister Shigeru Ishiba said he is stepping down. An election within the ruling Liberal Democratic Party to pick a new leader is expected October 4.

In the bond market, the yield on the 10-year Treasury eased to 4.03 per cent from 4.05 per cent late Monday.

AP

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