TOKYO (AP) — Asian stocks mostly rose Tuesday as investors monitored the latest indicators of U.S. inflation.
Japan’s benchmark Nikkei 225 index added 2.2% in morning trading to 37,723.62. Australia’s S&P/ASX 200 index edged up almost 0.1% to 7,619.20. South Korea’s Kospi jumped 1.2% to 2,651.33. Trade was closed in China, Hong Kong and Taiwan for the Lunar New Year holiday.
Data from Japan’s producer price index showed an increase of 0.2% from last year, while remaining stable over the month.
“This modest figure could still suggest a limited impact on consumer prices and could allow the Bank of Japan to remain wait-and-see for the time being. Market expectations predicted a rate hike only in April 2024,” said Yeap Jun Rong, market analyst at IG.
Wall Street remained relatively stable after its last record week. The S&P 500 slipped 4.77 points, or 0.1%, to 5,021.84 on Monday, after closing Friday above the 5,000 level for the first time.
Most stocks in the index rose, but losses at Microsoft and other technology companies weighed on the index.
Weakness in tech also sent the Nasdaq Composite Index down 48.12, or 0.3%, to 15,942.55. Earlier in the day, it was just above its all-time closing high set in 2021. The Dow Jones Industrial Average, meanwhile, rose 125.69, or 0.3%, to 38,797 .38 to set his latest record.
Conditions were calm in the markets and yields were also stable in the bond market. The next big event for the market could be Tuesday’s update on U.S. inflation, which economists expect will fall back below the 3% level.
Concerns have been growing about the top-heavy stock market, where the seven largest companies have contributed a disproportionate share of the S&P 500’s rally to a record. If more companies, outside of the group known as the Magnificent Seven, manage to generate strong profit growth, it could ease criticism that the market has become too expensive.
Another concern for the market is uncertainty over the danger posed to the economy by banks’ loans and other holdings on their balance sheets linked to commercial real estate.
The widely held expectation, even among senior U.S. government officials, is that weakness in office buildings and other commercial projects will cause at least some difficulty for banks. But no one can say for sure how much.
This is why we focused so much on Community Bank of New York recently. It shocked investors two weeks ago by announcing a surprise loss for its last quarter. Part of the pain was due to the acquisition of Signature Bank during the industry’s mini-crisis last year. But concerns about commercial real estate also played a role.
Shares of New York Community Bancorp have fallen by about half since that surprise report, but they remained a bit more stable on Monday. It decreased slightly by 0.2%.
An index measuring share prices in the regional banking sector rose 1.8%.
On the bond market, yields have changed very little. The 10-year Treasury yield fell to 4.16% from 4.18% Friday evening.
The two-year Treasury yield, which more closely tracks expectations for the Federal Reserve, held steady at 4.48%, where it stood Friday evening.
Inflation has cooled enough for the Federal Reserve has hinted that it could cut its main interest rate several times this year. Such cuts generally boost financial markets and the economy, and they would relieve pressure built up since the Fed raised its main interest rate to its highest level since 2001.
After hoping rate cuts could begin as early as March, traders have since pushed back their forecasts to May or June. Reports showing the U.S. economy and job market remain remarkably strong, as well as some comments from Fed officials, have forced delays.
If the Fed ends up making traders wait even longer than expected for rate cuts, it could upend stock prices that have already soared assuming lots of good news, according to Marc Dizard, chief investment strategist at PNC Asset Management Group. In addition to lower interest rates, this also implies a stronger conviction that the U.S. economy is not in a recession, a continued decline in inflation, and stronger corporate profit growth.
“There’s not much more than can really happen,” he said.
In energy trading, benchmark U.S. crude edged up 3 cents to $76.95 a barrel. Brent crude, the international standard, rose 1 cent to $81.99 a barrel.
In currency trading, the U.S. dollar rose to 149.40 Japanese yen from 149.30 Japanese yen. The euro costs $1.0767, up from $1.0774.
AP Business Editor Stan Choe contributed.
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