ASX set to fall as Wall Street slides, oil jumps; A divided Fed keeps rates on hold

Oil prices kept spurting higher and neared their highest levels since 2022. The leap, along with hints that some Federal Reserve officials don’t want to cut interest rates any time soon, sent tremors through the US bond market, but US stocks dipped only modestly.

The S&P 500 fell 0.4 per cent and was on track for a second slip after setting its latest all-time high. The Dow Jones was down 394 points, or 0.8 per cent, and the Nasdaq composite was 0.4 per cent lower.

The Fed left its benchmark interest rate unchanged for the third straight meeting but signalled it could still cut rates in the coming months, moves that attracted the most dissents since October 1992. Three officials dissented in favour of removing the reference to a future cut, while a fourth, Stephen Miran, dissented in favour of an immediate rate cut.

Outgoing Fed chair Powell says he will stay on Fed’s board after his term as chair ends for an “undetermined period of time.” The Senate Banking Committee earlier approved Powell’s successor as chair, Trump appointee Kevin Warsh, on a party-line vote.

The Australian sharemarket is set to decline, with futures pointing to a loss of 77 points, or 0.9 per cent, at the open. The ASX lost 0.3 per cent on Wednesday. The Australian dollar was lower at US71.07¢.

The action was more dramatic in the oil market, where the price for a barrel of Brent crude to be delivered in July jumped 5.8 per cent to $US110.41 per barrel. It’s where most of the trading is happening in the Brent market, and it got as high as $US111.50 earlier in the day.

The highest price reached since the war with Iran began is $US119.50 for the most actively traded Brent contract, reached last month. On Wednesday, the price for a barrel of Brent crude to be delivered in June, which is getting less trading action than July’s contract, briefly breached that mark. It got as high as $US119.76.

Oil prices have climbed as President Donald Trump appears willing to keep up the US blockade of Iranian ships, which is preventing the country from making money by selling oil. Iran, in turn, is keeping the Strait of Hormuz closed to other oil tankers hoping to carry crude to customers worldwide as long as the blockade continues.

High oil prices are one of the reasons the Federal Reserve cited when it said Wednesday it is holding off on resuming its cuts to interest rates. While lower rates could give the economy a boost, they also risk worsening inflation.

Three Fed officials also said in their meeting that they did not want to include anything suggesting more cuts may be coming in the central bank’s statement announcing the decision.

Treasury yields climbed in the bond market immediately afterward, adding to gains from earlier in the day due to rising oil prices. The yield on the 10-year Treasury jumped to 4.40 per cent from 4.36 per cent late Tuesday.

The two-year Treasury yield, which more closely tracks expectations for Fed action, rose more. It jumped to 3.91 per cent from 3.84 per cent. Traders are still largely expecting the Fed to hold rates steady through the end of this year, according to data from CME Group. But they are once again betting on a small chance for a hike to rates.

Still, the US stock market remained largely resilient as more companies joined the procession reporting stronger profit growth for the start of 2026 than analysts expected.

Visa jumped 9 per cent after delivering stronger results than analysts expected, and CEO Ryan McInerney said consumer spending remained resilient in the quarter. Starbucks climbed 8.9 per cent after likewise reporting better results than expected, while saying customers spent more at each visit, particularly at its North American stores.

But those not meeting expectations have gotten punished. GE Healthcare Technologies dropped 12.6 per cent after falling short of analysts’ forecasts. Robinhood Markets tumbled 14.7 per cent after reporting growth in profit that was not as strong as analysts expected.

Booking Holdings swung between losses and gains after the online travel company said the war with Iran is affecting its results and kept some potential customers from booking rooms during the latest quarter.

The company behind Booking.com, Priceline and other brands is expecting the conflict to continue affecting its business through the end of June. It could affect travel not only in the Middle East but also in major transit corridors, such as between Europe and Asia.

In stock markets abroad, indexes fell in Europe following a stronger finish in Asia. Hong Kong’s Hang Seng jumped 1.7 per cent for one of the world’s strongest moves.

AP

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