Why is the ASX 200 falling despite a huge Wall Street rally?

The ASX 200 has failed to follow Wall Street higher.

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The S&P/ASX 200 Index (ASX: XJO) is heading lower on Tuesday despite a strong lead from Wall Street.

At the time of writing, the benchmark index is down 0.39% to 8,879 points after falling as low as 8,834 points shortly after open.

That leaves the ASX 200 on track to give back part of the 3.3% gain recorded across the previous 2 sessions.

The selling is also spread across most of the market, with 122 companies trading lower, compared with 69 gainers and 9 unchanged stocks.

So, why is the Aussie share market falling today?

ASX board.

Image Source: Getty Images

RBA decision in focus

Investors are waiting for the Reserve Bank of Australia's (RBA) interest rate decision at 2:30pm AEST.

According to The Australian, most economists expect the cash rate to remain at 4.35% after 3 increases since February. A recent poll found that 42 of 45 economists were expecting no change today.

However, investors will be watching the accompanying statement and Governor Michele Bullock's press conference for any clues about what could happen next.

The S&P/ASX 200 Financials Index (ASX: XFJ) was down as much as 1.4% earlier in the session before recovering most of those losses.

Commonwealth Bank of Australia (ASX: CBA) shares are down 0.80% to $160.49, while Westpac Banking Corp (ASX: WBC) shares have fallen 0.74% to $35.06.

National Australia Bank Ltd (ASX: NAB) shares are also down 0.79% to $37.17, although ANZ Group Holdings Ltd (ASX: ANZ) shares are edging 0.17% higher to $34.57.

Wall Street rally fails to carry the ASX 200

The weakness comes despite a strong overnight session in the United States.

The Nasdaq Composite Index (NASDAQ: .IXIC) surged 3.07%, the S&P 500 Index (SP: .INX) gained 1.65%, and the Dow Jones Industrial Average Index (DJX: .DJI) rose 0.92% to a record close.

Tech shares led the rally after the proposed peace agreement between the US and Iran sent oil prices lower and eased some concerns about inflation.

But the gains were concentrated in areas that have less influence on our local market. The ASX 200 also entered today after climbing 1.98% on Friday and 1.25% on Monday, which may have encouraged some investors to take profits.

Mixed company moves

There are also several large companies weighing on the index.

Wesfarmers Ltd (ASX: WES) shares are down 1.81% to $84.67, while Transurban Group (ASX: TCL) shares have dropped 2.41% to $14.98 following broker downgrades.

Aristocrat Leisure Ltd (ASX: ALL) shares are also falling 1.71% to $52.19.

Investors are also digesting weaker economic data from China. Retail sales fell 0.6% in May compared with a year earlier, marking the first annual decline since 2022.

With the RBA decision still to come, some investors may be holding back ahead of the announcement.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Transurban Group. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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