ASX set to slide, Wall Street retreats as oil prices climb; BHP, CSL results ahead

US stocks are edging further from their record heights on Monday, ahead of a week where profit reports from the nation’s biggest retailers could give a hint about how shoppers are dealing with high inflation and a slowing job market.

The S&P 500 slipped 0.4 per cent but remains near its all-time high set Thursday. The Dow Jones Industrial Average was down 284 points, or 0.5 per cent, in mid-afternoon trade, and the Nasdaq composite was 0.3 per cent lower.

The Australian sharemarket is set to decline, with futures at 5.58am AEST pointing to a fall of 48 points, or 0.5 per cent, at the open. The ASX lost 0.5 per cent on Monday. The Australian dollar is stronger at US71.03¢. Reporting season continues with BHP and CSL results slated to be released today.

Wall Street has run to records in large part because profits are booming for US companies. Those in the S&P 500 index are on track to deliver growth of roughly 50 per cent for earnings per share in the spring from a year earlier, according to FactSet. That’s much better than analysts expected and would be the best since five years ago, when the economy was erupting out of the chasm created by the COVID pandemic.

Nearly all the companies in the S&P 500 have turned in their profit reports for the spring. Still to come are big retailers, including reports this week from Home Depot, Target and Walmart.

They’re facing pressure. Their customers’ incomes may be turning iffier after US employers surprisingly cut more jobs last month than they added. At the same time, their customers are continuing to see bills rise quickly as inflation remains much higher than anyone would like.

A report last week said that shoppers surprisingly spent less at US retailers last month than in June, and CEOs for retailers could give colour this week on what they’re seeing.

In the meantime, the wait continues for what the war with Iran will do with oil prices. The price for a barrel of Brent crude rose 2.4 per cent to $US90.62 on Monday, and the losses for stocks solidified in the afternoon as the gains for oil prices accelerated.

Brent zigzagged between $US72 and $US102 last month as hopes rose and fell that the United States and Iran could reach a deal that would allow oil tankers to freely exit the Persian Gulf again.

In the bond market, Treasury yields ticked higher following their own big recent moves. The yield on the 10-year Treasury rose to 4.72 per cent from 4.68 per cent late on Friday following a report showing stronger-than-expected growth in manufacturing in New York state.

The 10-year yield has shot up from 3.97 per cent before the war with Iran, largely because higher oil prices raised the pressure on inflation and upped the probability that the Federal Reserve will have to hike interest rates.

Higher rates could keep a lid on inflation, but they do so by intentionally slowing the economy and making it more expensive for everyone to borrow money. The average long-term US mortgage rate has already jumped near its highest level in a year because of the rise in the 10-year Treasury yield.

Reports last week, though, showed that inflation last month was not as bad as earlier in the summer.