Asian stocks rose Thursday after U.S. stocks hit record highs on hopes that inflation will return in the right direction.
That optimism comes from a report showing that U.S. consumers had to pay prices for gasoline, car insurance and everything else in April that were 3.4% higher overall than a year earlier. While this is painful, it is not as bad as the 3.5% inflation rate recorded in March.
The slowdown came as a relief after reports on the consumer price index, or CPI, from earlier this year turned out to be consistently worse than expected. Wednesday’s report builds on expectations that the Federal Reserve could cut its main interest rate this year, the main concern of most investors.
In Asian trading, Tokyo’s Nikkei 225 index gained 0.8% to 38,676.83, even after the government announced that Japan’s economy had contracted at an annual rate of 2% over the January-March quarter.
Hong Kong’s Hang Seng Index rose 1.6% to 19,369.06 and the Shanghai Composite Index rose 0.5% to 3,134.97.
In Australia, the S&P/ASX 200 rose 1.6% to 7,874.70 while South Korea’s Kospi rose 0.8% to 2,751.32.
Taiwan’s Taiex rose 0.7% and India’s Sensex gained 0.5%.
On Wednesday, the S&P 500 index jumped 1.2% to surpass its previous high set a month and a half ago, closing at 5,308.15. The Dow Jones Industrial Average added 0.9% to 39,908.00 and the Nasdaq jumped 1.4% to 16,742.39, adding to its own record set a day earlier.
Stocks that tend to benefit the most from falling interest rates have helped dominate the market. Homebuilders benefited from hopes that Fed cuts could lead to lower mortgage rates, with Lennar, DR Horton and PulteGroup all rising more than 5%. Big tech companies and other high-growth stocks also rode the wave of rate cut expectations, and Nvidia’s 3.6% gain was the main force pushing the S&P 500 higher .
Real estate stocks in the S&P 500 climbed 1.7%, while shares of power companies and other utilities rose 1.4%. The dividends they pay look better to investors when the bonds pay less interest.
On Wall Street, Petco Health + Wellness helped lead the market after rising 27.9%. He named Glenn Murphy, CEO of investment firm FIS Holdings, as executive chairman.
On the losing side were GameStop and AMC Entertainment, as momentum reversed after their jaw-dropping week starts. GameStop fell 18.9%, although it is still up 126.5% for the week so far.
AMC Entertainment fell 20% after announcing it would issue nearly 23.3 million shares to erase $163.9 million in debt.
Another report released Wednesday showed no growth in spending by U.S. retailers in April compared to March. Economists expected growth of 0.4%.
The slowdown in retail sales could be seen as a positive for markets, as it could reduce upward pressure on inflation. But a slowdown in U.S. consumer spending would weaken one of the main pillars keeping the economy out of recession. The pressure has become particularly strong on low-income households.
On the bond market, the yield on 10-year Treasury bills fell to 4.34% from 4.45% Tuesday evening. The two-year yield, which moves more closely with expectations of Fed action, fell to 4.72% from 4.82%.
Traders now predict a nearly 95% chance that the Fed will cut its main interest rate at least once this year, according to CME Group data. That’s up from just under 90% the day before.
In other trading Thursday morning, benchmark U.S. crude oil rose 42 cents to $79.05 a barrel in electronic trading on the New York Mercantile Exchange. It gained 61 cents on Wednesday.
Brent crude, the international standard, rose 39 cents to $83.14 a barrel.
The U.S. dollar fell to 154.03 Japanese yen from 154.88 yen. The euro rose from $1.0885 to $1.0888.
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AP Business writers Matt Ott and Stan Choe contributed.
News Source : finance.yahoo.com
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