TOKYO — Asian shares traded mixed on Thursday as pessimism spread among investors over an impending interest rate cut in the United States.
Japan’s benchmark Nikkei was little changed, falling less than 0.1% to end at 35,466.17. The Australian S&The P/ASX 200 fell 0.6% to 7,346.50. South Korea’s Kospi gained 0.3% to 2,442.99. Hong Kong’s Hang Seng pared earlier losses, rising 0.6% to 15,369.59, while the Shanghai Composite fell 1.0% to 2,805.55.
Wall Street slipped on a new signal that it may have become too optimistic about when the Federal Reserve will make rate cuts.
The S&P500 fell 26.77 points, or 0.6%, to 4,739.21. It’s the second consecutive decline for the index, having completed its tenth winning week in the last eleven, close to an all-time high.
The Dow Jones Industrial Average fell 94.45, or 0.3%, to 37,266.67, and the Nasdaq composite fell 88.73, or 0.6%, to 14,855.62.
Rising bond market yields once again put downward pressure on stocks. Yields rose after a report showed sales at U.S. retailers in December were stronger than economists expected.
While that’s good news for an economy that has defied predictions of a recession, it could also continue to put upward pressure on inflation. That, in turn, could prompt the Federal Reserve to wait longer than traders expect to cut rates after rising dramatically over the past two years. Lower interest rates would ease pressure on the economy and the financial system while increasing investment prices.
The yield on the 10-year Treasury note rose immediately after the retail sales report, rising to 4.10% from 4.06% on Wednesday. Higher yields can limit companies’ profits, while investors also become less willing to pay high prices for stocks.
Higher returns hurt all types of investments, and high-growth stocks are often the hardest hit. Declines of 2% for Tesla and 0.9% for Amazon were among the heaviest weights for the S&P500. The smaller companies in the Russell 2000 index also fell as much as 1.5% before paring their losses to 0.7%.
Yields on two-year Treasury notes, which better track expectations for the Fed, also rose. It climbed to 4.34% from 4.22% on Wednesday as traders lowered their expectations for the Fed’s first rate cut in March. Traders are now betting on a probability of less than 60%, compared to about 70% a month earlier, according to data from CME Group.
In a speech on Wednesday, the head of the European Central Bank warned of the risks of cutting interest rates, one of the main levers that determine stock prices, too early.
The other key factor is corporate earnings, and several companies reported weaker results on Wednesday than analysts expected, including U.S. Bancorp and Big 5 Sporting Goods. Spirit Airlines was again under heavy pressure and fell 22.5%. The stock almost halved the day before after a US judge blocked the purchase by JetBlue Airways over fears it would lead to higher airfares. JetBlue lost 8.7%.
In energy trading, U.S. crude rose 54 cents to $73.10 a barrel. Brent crude, the international standard, added 34 cents to $78.22 a barrel.
In currency trading, the US dollar fell from 148.11 yen to 147.85 Japanese yen. The euro cost $1.0906, up from $1.0886.
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AP Business Writer Stan Choe contributed from New York. Yuri Kageyama is on X at https://twitter.com/yurikageyama.
