Stock market today: Asian shares trade mixed after Wall Street dips amid dimming rate cut hopes

By YURI KAGEYAMA
AP Business Writer

TOKYO (AP) — Asian shares traded mixed Thursday as pessimism spread among investors about any imminent interest rate cut in the United States.

Japan’s benchmark Nikkei added 0.5% in morning trading to 35,637.01. Australia’s S&P/ASX 200 slipped 0.5% to 7,357.40. South Korea’s Kospi gained 0.6% to 2,450.00. Hong Kong’s Hang Seng dipped nearly 0.2% to 15,251.64, while the Shanghai Composite dropped 2.3% to 2,768.90.

Wall Street slipped following another signal that it may have gotten too optimistic about when the Federal Reserve will deliver the cuts to interest rates.

The S&P 500 fell 26.77 points, or 0.6%, to 4,739.21. It’s the second-straight stumble for the index after it closed out its 10th winning week in the last 11 near its all-time high.

The Dow Jones Industrial Average dipped 94.45, or 0.3%, to 37,266.67, and the Nasdaq composite slumped 88.73, or 0.6%, to 14,855.62.

Rising yields in the bond market once again put downward pressure on stocks. Yields climbed after a report showed sales at U.S. retailers were stronger in December than economists expected.

While that’s good news for an economy that’s defied predictions for a recession, it could also keep upward pressure on inflation. That, in turn, could push the Federal Reserve to wait longer than traders expect to begin cutting interest rates after jacking them drastically higher over the past two years. Lower rates would relax the pressure on the economy and financial system, while also goosing prices for investments.

The yield on the 10-year Treasury jumped immediately after the retail-sales report and climbed from 4.06% to 4.10% Wednesday. Higher yields can crimp profits for companies, while also making investors less willing to pay high prices for stocks.

Higher yields hurt all kinds of investments, and high-growth stocks tend to be some of the hardest hit. Drops of 2% for Tesla and 0.9% for Amazon were among the heaviest weights on the S&P 500. The smaller companies in the Russell 2000 index also slumped as much as 1.5% before paring their loss to 0.7%.

The yield on the two-year Treasury, which more closely tracks expectations for the Fed, also jumped. It climbed from 4.22% to 4.34% Wednesday as traders trimmed their expectations for the Fed’s first rate cut to arrive in March. Traders are now betting on a less than 60% probability of that, down from roughly 70% a month earlier, according to data from CME Group.

A top Fed official, Gov. Christopher Waller, said Tuesday that the central bank could take its time before its next move on rates given how resilient the economy has remained.

“These comments leave a rate cut as early as March on the table but also indicate that such a move is not a done deal,” according to economists at Deutsche Bank led by Amy Yang.

On Wednesday, the head of the European Central Bank warned in a speech about the risks of cutting rates too soon.

Interest rates are one of the main levers that set stock prices. The other is corporate profits, and several companies reported weaker results Wednesday than analysts expected, including U.S. Bancorp and Big 5 Sporting Goods.

Charles Schwab reported stronger profit for the latest quarter than analysts expected, but its stock still fell 1.3%. Its revenue fell short of estimates, and analysts said its better-than-expected earnings were likely due in part to easier tax rates.

Spirit Airlines was under heavy pressure again and sank 22.5%. Its stock nearly halved the day before, after a U.S. judge blocked its purchase by JetBlue Airways out of fear that it would lead to higher airfares. JetBlue lost 8.7%.

In energy trading, benchmark U.S. crude rose 20 cents to $72.76 a barrel. Brent crude, the international standard, stood unchanged at $77.88 a barrel.

In currency trading, the U.S. dollar inched down to 148.03 Japanese yen from 148.11 yen. The euro cost $1.0894, up from $1.0886.

___

AP Business Writer Stan Choe contributed from New York. Yuri Kageyama is on X at https://twitter.com/yurikageyama.