But labour constraints would continue to limit growth and pose the greatest challenge to supermarkets, building and healthcare, he added: “Despite this budget making some incremental positive adjustments on labour supply, in the near term labour shortages still threaten companies ability to deliver on their customers demand.”

Coles’ shares fell 55 cents, or 3.34 per cent, to $16.06 after the supermarket giant said the federal budget’s warning of soaring energy bills will add to consumers’ worries as lower income earners start changing their buying habits to try to make their groceries stretch further.

Shares in market rival Woolworths also fell by around $1 after it revealed sales in its supermarkets had fallen 0.5 per cent in the first eight weeks of fiscal 2023.

On Wall Street overnight, the major stock indexes rallied for the third day and Treasury yields fell again. The S&P 500 rose 1.6 per cent, with roughly 90 per cent of stocks in the index notching gains. The benchmark index hadn’t been able to string together more than two gains in a row since mid-September.

The Dow Jones Industrial Average rose 1.1 per cent and the Nasdaq closed 2.3 per cent higher. Smaller company stocks outpaced the broader market, lifting the Russell 2000 index 2.7 per cent higher.

The latest gains came as bond yields fell significantly, reflecting speculation among investors that the Federal Reserve may begin easing up on its aggressive pace of interest rate increases as soon as this year.

The yield on the 10-year US Treasury, which impacts mortgage rates, slipped to 4.09 per cent from 4.23 per cent late on Monday. The yield on the two-year Treasury, which tracks Federal Reserve action, fell to 4.45 per cent from 4.50 per cent late on Monday.

Loading

“It seems like the market is saying that they think perhaps longer-term yields have peaked, and that’s providing some optimism to the (stock) market,” said Randy Frederick, managing director of trading & derivatives at Charles Schwab.

Technology stocks, retailers and communication companies were among the biggest drivers of Tuesday’s rally on Wall Street. Traders were sizing up a heavy round of earnings reports from big US companies.

General Motors rose 3.6 per cent after delivering solid results. United Parcel Service initially rose, but then slipped 0.3 per cent after the package delivery service beat Wall Street’s third-quarter earnings and revenue forecasts. Industrial conglomerate General Electric fell 0.5 per cent after reporting weak third-quarter earnings.

Many other big names are on deck to report earnings throughout the week. Boeing, Ford and Facebook’s parent company will report results on Wednesday. Caterpillar, Apple and Amazon are among the big companies reporting results on Thursday.

Outside of earnings, barbecue grill maker Weber soared 30.4 per cent after it said BDT Capital Partners is interested in buying the rest of the company. Adidas fell 2.4 per cent after the German sportswear company ended its partnership with the rapper formerly known as Kanye West over his offensive and antisemitic remarks.

The latest round of earnings reports are particularly important for investors looking for indications of inflation’s impact on various industries. Prices on everything from clothing to food remain at their highest levels in four decades, putting pressure on companies to raise prices and cut costs, while squeezing consumers.

Loading

The Federal Reserve and central banks around the world have been raising interest rates to tame inflation. That has investors concerned about the central bank going too far in trying to slow the economy and instead causing a recession.

The Fed is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. But traders have grown more confident that the Fed will dial down to a more modest increase of 0.50 percentage points in December, according to CME Group.

Markets have been looking for any sign that the central bank is ready to ease up on rate increases. That includes data that the world’s largest economy is slowing. The US economy actually contracted during the first half the year, and the government will release its third-quarter gross domestic product report on Thursday.