ASX set to slide, Wall Street retreats as bond yields, oil prices rebound

US stocks are pulling back from their record high on Wednesday in New York.

The S&P 500 fell 0.2 per cent, a day after topping its prior all-time high set in August. The Dow Jones Industrial Average was down 284 points, or 0.6 per cent, in early afternoon trade, and the Nasdaq composite was 0.4 per cent lower.

The Australian sharemarket is set to lose ground, with futures at 4.55am AEDT pointing to a loss of 58 points, or 0.7 per cent, at the open. The ASX dipped on Wednesday. The Australian dollar was trading at US69.66¢.

US stocks felt pressure as yields climbed in the bond market. The yield on the 10-year Treasury rose to 5.28 per cent from 5.27 per cent late on Tuesday. They were as high as 5.36 per cent earlier in the day and eased further following a $US39 billion ($56 billion) auction of those notes during the afternoon on Wednesday. Higher yields put downward pressure on prices for stocks and other investments. They can also slow the economy by making it more expensive for everyone to borrow money, and the 10-year yield is near its highest level since 2002.

Oil prices continued swinging amid uncertainty about when the war with Iran will allow the industry to return to normal. The price for a barrel of Brent crude, the international standard, fell 0.6 per cent to $US99.93 after rising above $US100 per barrel through the morning. That’s well above its $US72 price from before the war began, though it’s not as high as the nearly $US110 it was scraping last month.

Also pushing up on bond yields are worries about how much debt the US government and others worldwide have racked up, and how much more they add to it by the day.

The head of the International Monetary Fund said Wednesday that record levels of debt for governments is one of the three major crosscurrents driving where the global economy goes, along with artificial-intelligence technology and high energy prices.

“Some very tough political choices stare us in the face,” IMF Managing Director Kristalina Georgieva said in a speech in Singapore ahead of autumn IMF-World Bank meetings to be held in Bangkok next week.

She pointed in particular to France and Italy, among other European countries with high debt.

France’s CAC 40 stock index dropped 1.2 per cent for one of the world’s biggest losses as yields on French bonds got back to jumping amid worries about the government’s debt and strained budget. Protests across France have raised pressure on the government to increase spending, which could add further to its debt.

On Wall Street, Worthington Steel fell 8.8 per cent after the metals processing and manufacturing company reported weaker results for the latest quarter than analysts expected.

The pressure is on companies to continue to deliver big growth in profits. Such strength would help to support stock prices when the other big lever that affects stock prices, interest rates, is pushing downward.

Analysts have high expectations for this upcoming earnings reporting season. They’re forecasting growth in earnings per share of nearly 30 per cent, according to FactSet. If companies fall short of that bar, stock prices could easily fall further from their record heights.

Constellation Brands added 2 per cent after the seller of Modelo beer and Robert Mondavi wine reported a stronger profit for the latest quarter than analysts expected. But its gain was restrained after it also gave a forecasted range for profit over its full fiscal year whose midpoint was below what analysts expected.

In stock markets abroad, indexes fell across much of Europe and Asia.

South Korea’s Kospi sank 2 per cent for one of the world’s largest losses following a sharp drop for SK Hynix, one of its two dominant stocks.

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