Stock market today: Asian benchmarks are mixed while US seems committed to current rates

TOKYO — Asian shares traded mixed on Wednesday as expectations resurfaced that US yields could remain high for a while.

Japan’s benchmark Nikkei 225 fell 0.5% to 38,296.69 in afternoon trading. The Australian S&The P/ASX 200 rose less than 0.1% to 7,618.50. South Korea’s Kospi showed little change, falling to 2,608.93. Hong Kong’s Hang Seng fell 0.2% to 16,219.84, while the Shanghai Composite gained 1.1% to 3,040.72.

The mixed reaction came after Federal Reserve Chairman Jerome Powell said at a meeting on Tuesday that the central bank waited to cut its key interest rate, which is at the highest level since 2001, because it first needs more confidence. its target of 2%.

“Risk appetite remains weak as Fed Chairman Jerome Powell validates a later timeline for rate cuts, alongside a series of Fed speakers calling for more patience in easing,” said Yeap Jun Rong, market analyst at IG.

On Wall Street, the S&P500 fell 10.41 points, or 0.2%, to 5,051.41. The index extended losses from the day before, when it sank under pressure from a rise in government bond yields.

The Dow Jones Industrial Average rose 63.86, or 0.2%, to 37,798.97, and the Nasdaq composite fell 19.77, or 0.1%, to 15,865.25.

But the majority of stocks fell as Treasury yields rose after Powell’s comments. They have risen rapidly as traders give up hope that the Fed will make many rate cuts this year. High interest rates negatively impact the prices of all types of investments and increase the risk of a recession in the future.

“Recent data clearly has not given us more confidence, but instead indicates that it will likely take longer than expected to achieve that confidence,” Powell said, pointing to a series of reports this year that showed inflation remained higher than predicted.

He suggested that if higher inflation persists, the Fed will keep rates stable for as long as necessary. But he also acknowledged that the Fed could cut rates if the labor market unexpectedly weakens.

The yield on the two-year U.S. Treasury note, which tracks expectations for Fed action, rose to 5% immediately after Powell spoke and returned to November levels.

But as the afternoon wore on, yields later narrowed and the two-year yield fell back to 4.98%. That is still higher than the 4.91% at the end of Monday.

Traders are mainly betting that the Fed will make just one or two rate cuts this year after expecting six or more cuts in 2024. They are also now betting on a 12.5% ​​probability that there will be no cuts, compared to just 1.2% a month ago, according to data from CME Group.

Companies are under even more pressure than usual to report bigger profits and revenues because the other lever that drives stock prices, interest rates, seems unlikely to return much anytime soon.

Shares of Donald Trump’s social media company also fell again. Trumpmedia & Technology Group fell another 14.2%, following Monday’s 18.3% decline.

The company said it is rolling out a service to stream live TV on its Truth Social app, including news networks and “other content that has been canceled, at risk of being canceled or suppressed on other platforms and services.”

The stock has fallen below $23 after nearing $80 last month, as the euphoria around the stock fades and the company has taken steps to clear the way for some investors to sell shares.

In energy trading, benchmark U.S. crude lost 52 cents to $84.54 a barrel. Brent crude, the international standard, fell 45 cents to $89.57 a barrel.

In currency trading, the US dollar fell from 154.65 yen to 154.64 Japanese yen. The euro cost $1.0623, up from $1.0617.