Asian stocks mixed after Wall Street’s biggest pullback of the year

Asian stocks traded mixed on Thursday as investors turned cautious following Wall Street’s biggest pullback of the year.

Stocks fell in Tokyo but rose in Seoul and Sydney, where they erased earlier losses by late morning. Hong Kong stocks were slightly lower while Shanghai stocks were little changed.

Japan’s benchmark Nikkei 225 slipped 1.5% to 26,380.26. Australia’s S&P/ASX 200 was up 0.6% to 7,437.10. Kospi of South Korea was up 0.3% to 2,376.08. Hong Kong’s Hang Seng was little changed at 21,672.07, while the Shanghai Composite was up 0.1% to 3,228.60.

In some positive news, data from the Japan National Tourism Organization showed that tourists and other types of travel to Japan from Asia outside of China had rebounded over the past month.

According to the data, December’s attendance totaled 1.37 million people, about the same level as December 2020. However, more time is needed before such numbers return to pre-COVID-19 levels, one said Report by SMBC Nikko.

“On the macro front, uncertainties remain about the outlook for the global economy. A string of disappointing US data releases and hawkish Fed rhetoric are also adding to risk aversion sentiment in the markets,” said Anderson Alves, trader at ActivTrades.

The S&P 500 fell 1.6% to 3,928.86 after initially rising as much as 0.6%. The Dow Jones Industrial Average slipped 1.8% to 33,296.96 and the Nasdaq Composite slipped 1.2%, ending a seven-day winning streak to 10,957.86. The losses mark a reversal for the market, which started the year with a two-week rally.

The Russell 2000 Index fell 1.6% to 1,854.36.

The sale came as new economic data showed that the economy is slowing as inflation eases, raising concerns about the possibility of a recession. Meanwhile, a key Federal Reserve policymaker said interest rates must rise higher than the central bank previously signaled.

The government reported that Americans cut spending at retailers more-than-expected last month, the second straight decline. Separately, the Federal Reserve said US industrial production, which includes manufacturing, mining and utilities, fell much more sharply in December than economists had expected.

The government also reported more encouraging inflation data. Wholesale prices rose 6.2% yoy in December, a sixth straight slowdown for the price gauge before being passed on to consumers.

Investors have hoped that easing inflation and slowing economic growth could affect the Federal Reserve’s position on interest rates. The central bank aggressively hiked interest rates throughout 2022 to cool off hot inflation, but that has hurt stock and bond prices and risked going too far and creating a recession.

While there are mounting signs that high inflation is finally easing, more rate hikes are still needed, according to Loretta Mester, President of the Federal Reserve Bank of Cleveland.

“I still see the bigger risk in underdressing,” Mester said in an interview with The Associated Press on Tuesday.

Mester underscored her belief that the Fed’s interest rate should rise “a little” above the 5% to 5.25% range that policymakers collectively forecast for later this year. It has raised its main overnight rate to a range of 4.25% to 4.50% from around zero a year ago. The Fed will announce its next interest rate decision in February. 1. Investors, for the most part, are forecasting just a 0.25 percentage point hike next month, down from December’s half-point hike and up from four previous 0.75 percentage point hikes.

The broader economic picture is still not clear enough to tell whether the Fed’s fight against inflation is working well enough to avoid a recession. Several major banks are forecasting at least a mild recession sometime in 2023.

Technology stocks were among the biggest detractors from the market, including a 1.9% drop at Microsoft after the tech titan announced layoffs along with others in its industry. The software giant is shedding 10,000 employees, or nearly 5% of its workforce.

Investors reviewed the latest corporate earnings to learn more about how inflation and consumer spending are affecting earnings and revenue. PNC Financial Services Group fell 6% after reporting weak earnings.

In energy trading on Thursday, US benchmark crude fell $1.25 to $78.23 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, it fell 70 cents to $79.48 a barrel.

Brent crude, the international price standard, fell $1.10 to $83.88 a barrel.

In forex trading, the US dollar fell to 128.00 Japanese yen from 128.87 yen. The euro costs $1.0799, little changed from $1.0796.

AP Business Writers Damian J. Troise and Alex Veiga contributed to this report.

Yuri Kageyama is on Twitter

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