Meridian Energy (down 3.6 per cent) was the biggest large-cap decliner, followed by Viva Energy (down 3.1 per cent), while heavyweight Santos (down 2 per cent) was also among the megacap losers. Healthcare (down 0.6 per cent) and real estate investment trusts (REITs, down 1 per cent) were the weakest sectors with Cochlear (down 2.1 per cent) and Goodman group (down 1.1 per cent) both sliding.

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The lowdown

IG Australia market analyst Tony Sycamore said the heavyweight financial and materials sectors were experiencing a reversal as the local bourse moved into the second quarter.

“Stronger-than-expected global purchasing managers index data are bolstering the price of key commodities, including copper, gold, iron ore and crude oil,” he said. “At the same time, higher bond yields may weigh on the financials.”

Overnight, the S&P 500 edged down by less than 0.1 per cent. It was coming off a shaky stretch where a 1.2 per cent drop immediately flipped to a 1.1 per cent gain. The Dow Jones and Nasdaq both also closed flat.

Much of the focus has been on interest rates and when the Federal Reserve will lower them to ease pressure on the economy and financial system. A string of reports showing inflation and the economy have remained hotter than expected has forced Wall Street to delay forecasts for when relief on rates could arrive.

This coming week has several flashpoints that could further swing expectations. On Wednesday will come the latest monthly update on the inflation that US consumers are feeling. Later in the week will be reports on inflation at the wholesale level and expectations for upcoming inflation among US households.

Fed Chair Jerome Powell said recently he still expected cuts to interest rates this year, but the central bank needed additional confirmation inflation was heading towards its target of 2 per cent. The Fed has been holding its main interest rate at the highest level since 2001, hoping to grind down enough on the economy and prices for investments to get inflation under control. The risk of holding rates too high for too long is that it could cause a recession.

Some Fed officials have raised the possibility of rates staying high for longer if inflation remains stubborn. That has pushed many traders on Wall Street to cut back expectations for how many cuts to rates there might be this year to two from three. They had already drastically pulled back their forecasts from the start of this year, when many were expecting six cuts or more.

Traders now see roughly a coin flip’s chance of the Fed cutting interest rates at its meeting in June, down from a better than 70 per cent probability a month ago, according to data from CME Group.

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Friday’s surprisingly strong jobs report showed that workers’ average hourly wages were behaving as expected, even though employers hired far more workers than expected last month.

But critics say stock prices already look expensive given their huge run of more than 20 per cent from November into March. That means “achieving ambitious earnings forecasts has become paramount,” according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

“Economic growth is good, but complacency around its implications is not,” she said.

On the losing end of Wall Street was Trump Media & Technology Group. The company behind the Truth Social platform has seen its stock price swing sharply by the day, as experts say it’s moving more on the hopes of Trump fans than on the profit prospects of the company. It sank 8.4 per cent.

In the bond market, Treasury yields rose to add to their gains for the year so far on diminished expectations for cuts to rates. The yield on the 10-year Treasury ticked up to 4.42 per cent from 4.40 per cent late Friday and from less than 3.90 per cent at the start of the year.

In stock markets abroad, indexes mostly rose across Europe and Asia, though stocks fell 0.7 per cent in Shanghai.

Tweet of the day

Quote of the day

“Sharemarket investors have largely ignored what’s happening in the bond market, instead either excited by the continuing developments in artificial intelligence or fearful of external events,” said senior business columnist Stephen Bartholomeusz, who discusses why financial markets are now only pricing in two interest rate cuts in the US.

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With AP