ASX to open lower as Wall Street falls on weak economic data

The Australian sharemarket is set to open lower after worries about a potentially toxic cocktail combining stubbornly high inflation with a flagging economy dragged down U.S. stocks overnight. A sharp drop for Facebook’s parent company, one of Wall Street’s most influential stocks, also hurt the market.

Meta Platforms, the company behind Facebook and Instagram, dropped 10.6 per cent even though it reported better profit for the latest quarter than analysts expected. Investors focused instead on the big investments in artificial intelligence Meta pledged to make. AI has created a frenzy on Wall Street, but Meta is increasing its spending when it also gave a forecasted range for upcoming revenue whose midpoint fell below analysts’ expectations.

But Thursday’s report said the U.S. economy’s growth slowed to a 1.6 per cent annual rate during the first three months of this year from 3.4 per cent at the end of 2023.That was weaker than expected and would have been disappointing by itself. Making it worse for financial markets, the report also said inflation was hotter during the three months than economists forecast. That could tie the hands of the Federal Reserve, which typically juices sluggish economies by cutting interest rates.

Underneath the surface, the economic report may not have been as bad as initially thought. Much of the slowdown was due to a rise in imports and other factors that can swing sharply and quickly. The main engine of the economy, spending by U.S. households, remained relatively solid. The yield on the 10-year Treasury rose to 4.70 per cent from 4.66 per cent just before the report and from 4.65 per cent late Wednesday.

Textron tumbled 9.7 per cent after the maker of Bell helicopters and Cessna jets reported weaker profit and revenue than forecast. Caterpillar sank 7 per cent despite reporting stronger profit than expected. Its revenue for the latest quarter fell short of analysts’ expectations.

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