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  • Asian stocks tumble amid fears about faster rate hikes

    Asian stocks tumble amid fears about faster rate hikes

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    TOKYO — Asian shares were mostly lower Wednesday as investors fretted that the Federal Reserve might raise interest rates faster if pressure stays high on inflation.

    Japan’s benchmark Nikkei 225 edged up 0.5% to finish at 28,444.19. Australia’s S&P/ASX 200 slipped 0.8% to 7,307.80. South Korea’s Kospi dropped 1.3% to 2,430.93.

    Chinese shares sank after officials in Beijing announced plans for a regulatory shakeup. Hong Kong’s Hang Seng tumbled 2.6% to 20,005.12, while the Shanghai Composite shed 0.6% to 3,266.65.

    Wall Street shuddered Tuesday after Fed Chairman Jerome Powell told lawmakers that the central bank would keep interest rates higher if need be to fight inflation.

    “Asian shares were under pressure on Wednesday as global equities sold off after hawkish comments from Fed Chair Powell. He noted recent macro data, while possibly related to seasonal adjustments, suggest the Committee might have to raise rates higher than expected,” said Anderson Alves at ActivTrades.

    A Fed meeting later this month is expected to result in another rate hike. When Powell speaks at U.S. Congress again later in the day, traders will watch to see if he reinforces the hawkish rhetoric or tones it down, given the market reaction.

    Wall Street declined as angst over the Fed raised worries about a possible recession down the line. The S&P 500 dropped 1.5% for one of its worst days of the year so far, closing at 3,986.37. The Dow Jones Industrial Average lost 1.7% to 32,856.46, and the Nasdaq sank 1.3% to 11,530.33.

    Inflation and what the Fed is doing about it have been at the center of Wall Street’s sharp swings this year. After seeming to be on a steady decline since last summer, reports on inflation last month came in surprisingly hot. So did a suite of other data on the economy.

    That raised fears that inflation is staying stickier than feared and that the Fed will have to raise rates higher than earlier thought. Higher rates can drag down inflation because they slow the economy, but they hurt prices for stocks and other investments. They also raise the risk of a recession later on.

    Powell has confirmed some of those fears, saying the data mean “the ultimate level of interest rates is likely to be higher than previously anticipated.” He also said in his testimony to a Senate committee that the Fed is ready to increase the pace of its hikes again if needed.

    That would be a sharp turnaround after it had just slowed its pace of increases to 0.25 percentage points last month from earlier hikes of 0.50 and 0.75 points.

    “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said. “Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time.”

    After sitting at virtually unchanged levels just before Powell’s testimony, stocks fell immediately afterward.

    “This is the market coming back to realistic expectations,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. ”I think it’s going to continue to wash out some of the excesses in the market.”

    Wall Street has largely abandoned hopes that percolated early this year for a possible cut to interest rates later in 2023. It also upped its forecast for how high the Fed will ultimately take rates before pausing.

    That’s been most clear in the bond market, where the yield on the 10-year Treasury topped 4% last week and hit its highest level since November. It helps set rates for mortgages and other important loans.

    Early Wednesday it was at 4%.

    The two-year Treasury yield, which moves more on expectations for the Fed, shot up to 5.01% from 4.87% and is at its highest level since 2007.

    The U.S. government’s monthly jobs report, due Friday, will provide an update on wages. The Fed’s fear is that too-strong gains could push prices higher.

    The challenge for the market has been that the economy has actually been too strong, despite all the rate increases the Fed has thrown at it. That suggests a recession may not be looming but also likely means rates will need to stay higher for longer, raising risks of a deeper recession down the line.

    In energy trading, benchmark U.S. crude lost 10 cents to $77.48 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 6 cents to $83.35 a barrel.

    In currency trading, the U.S. dollar rose to 137.72 Japanese yen from 137.07 yen. The euro cost $1.0537, down from $1.0551.

    ___

    AP Business Writer Stan Choe contributed.

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  • Global shares mixed as investors watch Fed moves, inflation

    Global shares mixed as investors watch Fed moves, inflation

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    TOKYO — Global shares were mixed in muted trading Tuesday as investors tried to digest a slew of economic data and awaited moves by the U.S. Federal Reserve.

    France’s CAC 40 fell 0.1% in early trading to 7,363.24. Germany’s DAX added nearly 0.1% to 15,659.63. Britain’s FTSE 100 edged up less than 0.1% to 7,931.95. U.S. shares were set to drift higher with Dow futures up nearly 0.1% at 33,470.00. S&P 500 futures rose 0.1% to 4,057.75.

    Japan’s benchmark Nikkei 225 rose 0.3% to finish at 28,309.16. Australia’s S&P/ASX 200 gained 0.5% to 7,364.70. South Korea’s Kospi added less than 0.1% to 2,463.35. Hong Kong’s Hang Seng lost earlier gains to finish down 0.3% at 20,534.48, while the Shanghai Composite slipped 1.1% to 3,285.10. Oil prices and currencies were little changed.

    The Reserve Bank of Australia decided to raise its key rate, cash rate target, by 0.25 of a percentage point to 3.6%. It said that although global inflation remains high, inflation in Australia is starting to subside. The hike was expected.

    “Asian equities were flat on Tuesday as traders weighed the impact of economic data and awaited key events that could impact equity markets in the coming days,” said Anderson Alves at ActivTrades.

    The stock market has found some footing over the last week after a swift rise at the start of the year gave way to a sharp tumble. Driving the movements are high inflation and expectations of what the Federal Reserve will do about it.

    Early in the year, stocks rallied and bond yields eased as hopes rose that cooling inflation would get the Fed to take it easier in its hikes in interest rates. Then, stronger-than-expected reports on the economy raised worries that inflation was not cooling as smoothly as hoped.

    While that calmed worries that a recession is looming, it also forced Wall Street to raise its forecasts for how high the Fed will take interest rates. Higher rates can drive down inflation, but also hurt prices for stocks and other investments and can create a recession in the future.

    Bigger action may be ahead later this week, with several potentially market-moving events on the calendar.

    Fed Chair Jerome Powell will testify before Congress for two days beginning on Tuesday. Other Fed officials’ comments recently have led to big swings in markets, as traders try to get ahead of the next moves by the Fed.

    On Friday, the government will release its latest monthly jobs report. If the reading is stronger than expected, particularly if it shows a big gain in wages, it could shake Wall Street and force it to raise rate expectations even higher.

    The Fed has been trying to cool growth in wages to remove pressure on inflation, which remains far above its 2% target, and blowout figures could cause it to get more aggressive about rates.

    The Fed’s next move on rates will arrive later this month. Besides Friday’s jobs report, upcoming releases on inflation across the economy will likely also carry a lot of weight on the decision.

    The Fed has pulled its key overnight rate to a range of 4.50% to 4.75%, up from virtually zero at the start of last year, in its fastest set of hikes in decades. Last month, it dialed down the size of its increases and highlighted progress being made in the battle to get inflation lower.

    But that was before last month’s hotter-than-expected data on inflation and other measures of the economy. Wall Street now is bracing for at least three more hikes and the possibility the Fed could also ratchet the size of the increases back up.

    In energy trading, benchmark U.S. crude fell 2 cents to $80.44 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 1 cent to $86.17 a barrel.

    In currency trading, the U.S. dollar declined to 135.81 yen from 135.93 yen. The euro cost $1.0676, down from $1.0685.

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  • Asian shares mixed as investors watch Fed moves, inflation

    Asian shares mixed as investors watch Fed moves, inflation

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    TOKYO — Asian shares were mixed in muted trading Tuesday, as investors tried to digest a slew of economic data and awaited moves by the U.S. Federal Reserve.

    Japan’s benchmark Nikkei 225 rose 0.3% to 28,309.16. Australia’s S&P/ASX 200 gained 0.5% to 7,364.70. South Korea’s Kospi added less than 0.1% at 2,463.35. Hong Kong’s Hang Seng lost earlier gains to fall 0.5% to 20,494.11, while the Shanghai Composite slipped 1.1% to 3,285.10.

    The Reserve Bank of Australia decided to raise its key rate, cash rate target, 0.25 of a percentage point to 3.6%. It said that although global inflation remains high, inflation in Australia is starting to subside. The hike was expected.

    “Asian equities were flat on Tuesday as traders weighed the impact of economic data and awaited key events that could impact equity markets in the coming days,” said Anderson Alves at ActivTrades.

    Stocks finished mixed on Wall Street. The S&P 500 rose 0.1% to 4,048.42 after coming off its first winning week in the last four. The Dow Jones Industrial Average gained 0.1% to 33,431.44, and the Nasdaq composite slipped 0.1% to 11,675.74.

    The stock market has found some footing over the last week after a swift rise at the start of the year gave way to a sharp tumble. Driving the movement are high inflation and expectations for what the Federal Reserve will do about it.

    Early in the year, stocks rallied and bond yields eased as hopes rose that cooling inflation would get the Fed to take it easier on its hikes to interest rates. Then, stronger-than-expected reports on the economy raised worries that inflation is not cooling as smoothly as hoped.

    While that calmed worries that a recession is looming, it also forced Wall Street to raise its forecasts for how high the Fed will take interest rates. Higher rates can drive down inflation, but they also hurt prices for stocks and other investments and can create a recession in the future.

    On Wall Street, technology stocks were some of the market’s strongest. They tend to be some of the biggest beneficiaries of lower interest rates, which can boost demand by investors for high-growth companies.

    Apple rose 1.9%, and Microsoft ticked up 0.6% to be the two biggest forces lifting the S&P 500.

    On the losing end was Tesla, which fell 2%. Over the weekend, it cut the prices of two of its most expensive vehicles.

    Bigger action may be ahead later this week, with several potentially market-moving events on the calendar.

    Fed Chair Jerome Powell will testify before Congress for two days, beginning on Tuesday. Other Fed officials’ comments recently have led to big swings in markets, as traders try to get ahead of the next moves by the Fed.

    On Friday, the government will release its latest monthly jobs report. If the reading it stronger than expected, particularly if it shows a big gain in wages, it could shake Wall Street and force it to raise rate expectations even higher.

    The Fed has been trying to cool growth in wages to remove pressure on inflation, which remains far above its 2% target, and blowout figures could cause it to get more aggressive about rates.

    The Fed’s next move on rates will arrive later this month. Besides Friday’s jobs report, upcoming releases on inflation across the economy will likely also carry a lot of weight on the decision.

    The Fed has pulled its key overnight rate to a range of 4.50% to 4.75%, up from virtually zero at the start of last year, in its fastest set of hikes in decades. Last month, it dialed down the size of its increases and highlighted progress being made in the battle to get inflation lower.

    But that was before last month’s string of hotter-than-expected data on inflation and other measures of the economy. Wall Street now is bracing for at least three more hikes and the possibility the Fed could also ratchet the size of the increases back up.

    In energy trading, benchmark U.S. crude added 6 cents to $80.52 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 8 cents to $86.26 a barrel.

    In currency trading, the U.S. dollar inched up to 135.94 Japanese yen from 135.93 yen. The euro cost $1.0683, down from $1.0685.

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  • How major US stock indexes fared Monday 3/6/2023

    How major US stock indexes fared Monday 3/6/2023

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    Stocks drifted to a mixed close as Wall Street stays in a holding pattern ahead of a potentially big week

    Stocks drifted to a mixed close as Wall Street stays in a holding pattern ahead of a potentially big week.

    The S&P 500 edged up 0.1% Monday after coming off its first winning week in the last four. Treasury yields were holding steady following big recent moves higher.

    The stock market has found some footing over the last week after a roller-coaster start to the year where a swift rise gave way to a sharp tumble. At the center of it all has been high inflation and expectations for what the Federal Reserve will do about it.

    On Monday:

    The S&P 500 rose 2.78 points, or 0.1%, to 4,048.42.

    The Dow Jones Industrial Average rose 40.47 points, or 0.1%, to 33,431.44.

    The Nasdaq composite fell 13.27 points, or 0.1%, to 11,675.74.

    The Russell 2000 index of smaller companies fell 28.51 points, or 1.5%, to 1,899.76.

    For the year:

    The S&P 500 is up 208.92 points, or 5.4%.

    The Dow is up 284.19 points, or 0.9%.

    The Nasdaq is up 1,209.25 points, or 11.6%.

    The Russell 2000 is up 138.51 points, or 7.9%.

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  • Asian stocks gain after Wall Street has best day in 6 weeks

    Asian stocks gain after Wall Street has best day in 6 weeks

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    BANGKOK — Shares were mostly higher Monday in Asia after strong data on the U.S. economy sent Wall Street to its best close in six weeks.

    Hong Kong’s Hang Seng index rose 0.4% to 20,642.89 and the Shanghai Composite index lost 0.3% to 3,318.56.

    At the annual session of China‘s rubberstamp legislature, the government set this year’s economic growth target at “around 5% ” as it tries to rebuild business activity following the end of anti-virus controls that kept millions of people at home.

    Chinese leader Xi Jinping has said the priority is an economic revival based on consumer spending after growth sank to 3% last year, its second-lowest level since at least the 1970s. Officials who briefed media Monday about economic planning did not provide fresh or specific policy initiatives to attain that goal.

    “The slower-than-expected GDP growth target set by the government of around 5% matches our GDP forecast of 5% for this year,” ING said in a commentary. “The government realizes that a weakening external market would impose challenges to China’s export-related industries.”

    Tokyo’s Nikkei 225 gained 1.1% to 28,237.78 and the Kospi in Seoul added 1.3% to 2,462.62. The S&P/ASX 200 in Australia added 0.6% to 7,328.60. India’s Sensex climbed 1% to 60,428.43 and shares rose in Taiwan. Thailand’s markets were closed for a national holiday.

    On Friday, the S&P 500 rose 1.6% to cap its first winning week in the last four as relaxing yields in the bond market took some pressure off Wall Street. It’s found some stability following a swift rise and fall to start the year.

    The Dow Jones Industrial Average climbed 387 points, or 1.2%, while the Nasdaq composite jumped 2%.

    Markets have been fluctuating amid uncertainty over where inflation is heading and what the Federal Reserve will do about it.

    Wall Street rallied earlier in the year on hopes that cooling inflation would get the Fed to take it easier on its hikes to interest rates. Such increases can drive down inflation by slowing the economy, but they also raise the risk of a recession later on and hurt prices for investments.

    Last month, stocks fell after reports on the economy came in hotter than expected. They included data on the jobs market, consumer spending and inflation itself at multiple levels.

    The strong data raised concerns about continued upward pressure on inflation. That forced Wall Street to abandon hopes for rate cuts this year and raise its expectations for how high rates would go.

    But data released Friday that showed the economy is in better shape than thought was taken as a good sign, calming worries about a possible recession even if it could add to pressure on inflation.

    The yield on the 10-year Treasury fell Monday to 3.94%, extending its decline from 4.06% late Thursday. It’s a respite from its shot higher over the last month as expectations rose for a firmer Fed.

    The next move by the Fed on interest rates is scheduled for later this month. Before then, reports on the strength of the job market and on inflation will likely have big impacts on the market and expectations for what the Fed will do.

    Last month, it dialed down the size of its rate increases and highlighted progress being made in the battle to get inflation lower. It also earlier suggested just two more increases to rates may be on the way. But the strong reports since then have raised worries that the Fed could not only hike at least three more times but also could dial back up the size of the increases.

    In other trading Monday, U.S. benchmark crude lost 45 cents to $79.23 per barrel in electronic trading on the New York Mercantile Exchange. It gained $1.52 to $79.68 per barrel on Friday.

    Brent crude, the international pricing standard, lost 49 cents to $85.34 per barrel.

    The dollar fell to 135.83 Japanese yen from 135.98 yen late Friday. The euro rose to $1.0639 from $1.0626.

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  • Chinese planners promise 12 million jobs, economic rebound

    Chinese planners promise 12 million jobs, economic rebound

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    BEIJING — Chinese economic officials expressed confidence Monday they can meet this year’s growth target of “around 5%” by generating 12 million new jobs and encouraging consumer spending following the end of anti-virus controls that kept millions of people at home.

    The Cabinet planning officials announced no details of spending or other initiatives to revive growth that slumped to 3% last year, the second-lowest in decades. But they said they plan an array of measures to meet goals announced Sunday by Premier Li Keqiang by raising incomes and encouraging innovation.

    Efforts to revive the Chinese economy have global implications after weak retail, auto and housing sales depressed demand for imports. The country is the biggest export market for its Asian neighbors and an important revenue source for Western companies.

    “There are many policy tools in our toolbox,” the deputy chairman of the National Reform and Development Commission, Li Chunlin, said at a news conference held during the meeting of China’s ceremonial legislature.

    The premier’s work report Sunday was unusually brief and gave few details, suggesting the ruling Communist Party will wait until a new premier and Cabinet ministers are appointed this month in a once-a-decade handover to announce tax, regulatory, subsidy and other changes.

    This year’s job creation target is 12 million, up from last year’s goal of 11 million and below the 12.1 million that was achieved, according to Li.

    The NDRC chairman, Zhao Chenxin, said the priority is to “release consumption potential” and promote an “innovation-driven development strategy.”

    That is in line with ruling party plans to nurture self-sustaining growth based on consumer spending instead of exports and investment and to generate prosperity and global influence by making China a creator of valuable technologies.

    The NDRC’s Li warned that the global environment “is becoming more complex and severe,” a reference to weak export demand due to Western interest rate increases to cool inflation and strained relations with Washington and other trading partners over technology, security and territorial disputes.

    That will add to pressure on Chinese export industries that support millions of jobs, increasing the importance of self-sustaining business activity at home.

    “Ability to consume comes from employment and income,” so the government must “increase the income of urban and rural residents,” Li said.

    Li gave no details, but the ruling party has previously pressured e-commerce and other big companies to share more of their wealth with the public by raising wages and cutting charges for small vendors and other entrepreneurs.

    The growth target is the lowest on record except for 2020, when the government dropped its goal at the start of the COVID pandemic.

    “We view it as a relatively conservative but pragmatic proposal for delivering a healthy and organic economic recovery,” said Nomura economists in a report. “China’s economy is still set to face with multiple headwinds over the course of the year.”

    The higher unemployment might be harder to achieve, so “job creation is likely to be a focus of work this year,” they wrote.

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  • China sets this year’s economic growth target at ‘around 5%’

    China sets this year’s economic growth target at ‘around 5%’

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    BEIJING — China’s government announced plans for a consumer-led revival of the struggling economy as its legislature opened a session Sunday that will tighten President Xi Jinping’s control over business and society.

    Premier Li Keqiang, the top economic official, set this year’s growth target at “around 5%” following the end of anti-virus controls that kept millions of people at home and triggered protests. Last year’s growth in the world’s second-largest economy fell to 3%, the second-weakest level since at least the 1970s.

    “We should give priority to the recovery and expansion of consumption,” Li said in a speech on government plans before the ceremonial National People’s Congress in the Great Hall of the People in central Beijing.

    The full meeting of the 2,977 members of the NPC is the year’s highest-profile event but its work is limited to endorsing decisions made by the ruling Communist Party and showcasing official initiatives.

    This month, the NPC is due to endorse the appointment of a government of Xi loyalists including a new premier after the 69-year-old president expanded his status as China’s most powerful figure in decades by awarding himself a third five-year term as party general secretary in October, possibly preparing to become leader for life. Li, an advocate of free enterprise, was forced out as the No. 2 party leader in October.

    Xi’s new leadership team will face challenges ranging from weak global demand for exports and lingering U.S. tariff hikes in a feud over technology and security to curbs on access to Western processor chips due to security fears.

    Separately, the Ministry of Finance announced a 7.2% budget increase for the ruling party’s military wing, the People’s Liberation Army, to 1.55 trillion yuan ($224 billion), the 29th straight annual increase. China’s military spending is the world’s second highest after the United States. The Stockholm International Peace Research Institute says the two countries together account for half of global military outlays.

    Li’s report called for boosting consumer spending by increasing household incomes but gave no details in his unusually brief, 53-minute speech. It was less than half the length of work reports in some previous years.

    The premier called for “building up our country’s strength and self-reliance in science and technology,” an area in which Beijing’s state-led efforts to create competitors in electric cars, clean energy, telecoms and other fields have strained relations with Washington and other trading partners. They complain China steals or pressures foreign companies to hand over technology and improperly subsidizes and shields its fledgling competitors in violation of its market-opening commitments.

    Xi earlier singled out encouraging jittery consumers and entrepreneurs to spend and invest as a priority at the ruling party’s economic planning meeting in December.

    Beijing needs to “fully release consumption potential,” Xi said, according to a text released last month.

    Since taking power in 2012, Xi has promoted an even more dominant role for the ruling party. He has called for the party to return to its “original mission” as China’s economic, social and cultural leader and carry out the “rejuvenation of the great Chinese nation.”

    Xi has crushed dissent, stepped up censorship and control over information, and tightened control over Hong Kong.

    Xi’s government has tightened control over e-commerce and other tech companies with anti-monopoly and data security crackdowns that wiped billions of dollars off their stock market value.

    Beijing is pressing them to pay for social welfare and official initiatives to develop processor chips and other technology. That has prompted warnings economic growth will suffer.

    Li’s report Sunday reinforced the importance of state industry. It promised to support entrepreneurs who generate jobs and wealth but also said the government will “enhance the core competitiveness” of state-owned companies that dominate industries from banking and energy to telecoms and steel.

    Li also called for “resolute steps” to oppose formal independence for Taiwan, the self-ruled island democracy claimed by Beijing as part of its territory. He called for “peaceful reunification” between China and Taiwan, which split in 1949 after a civil war, but announced no initiatives.

    Taiwan never has been part of the People’s Republic of China, but Beijing says it is obligated to unite with the mainland, by force if necessary. Xi’s government has stepped up efforts to intimidate the island by flying fighter jets and bombers nearby and firing missiles into the ocean.

    Chinese economic growth has struggled since mid-2021, when tighter controls on debt that Beijing worries is dangerously high triggered a slump in the vast real estate industry, which supports millions of jobs. Smaller developers were forced into bankruptcy and some defaulted on bonds, causing alarm in global financial markets.

    Longer term, the workforce has been shrinking for a decade, putting pressure on plans to increase China’s wealth and global influence.

    Consumer spending is gradually recovering, but the International Monetary Fund and some private sector forecasters expect economic growth this year as low as 4.4%, well below the official target.

    A measure of factory activity rose to a nine-year high in February. Other measures of activity including the number of subway passengers and express deliveries rose.

    A central bank official said Friday real estate activity is recovering and lending for construction and home purchases is rising.

    A recovery based on consumer spending is likely to be more gradual than one driven by government stimulus or a boom in real estate investment. But Chinese leaders are trying to avoid reigniting a rise in debt and want to nurture self-sustaining growth based on consumption instead of exports and investment.

    The official in line to become premier is Li Qiang, a former party secretary of Shanghai who is close to Xi but has no government experience at the national level. Li Qiang was named No. 2 party leader in October.

    That reflects Xi’s emphasis on promoting officials with whom he has personal history and bypassing party tradition that leadership candidates need experience as Cabinet ministers or in other national-level posts.

    If achieved, the official growth target would be an improvement over last year but down sharply from 2021’s 8.1%.

    Last year’s slump had global repercussions, depressing Chinese sales of autos and consumer goods and demand for oil, food and other imports. Even after the end of anti-virus curbs, auto sales fell by double digits in January and retail sales contracted.

    Entrepreneurs and foreign companies have been rattled by tighter political controls.

    Foreign business groups said last year global companies were shifting investment plans away from China because travel curbs blocked executives from visiting the country.

    Li, the premier, tried to reassure foreign investors by promising to open Chinese markets wider and repeating official pledges of equal treatment with domestic enterprises.

    “China is sure to provide even greater business opportunities for foreign companies,” he said.

    The party has indicated its tech crackdown is winding down but has given no sign it is backing off a campaign to tighten political control over the industry.

    Entrepreneurs were shaken anew in mid-February when a star banker, Bao Fan, who was involved in some of the biggest tech deals, disappeared. His company announced last week Bao was “cooperating in an investigation” but gave no details.

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  • Stocks jump as Wall Street cruises to best day since January

    Stocks jump as Wall Street cruises to best day since January

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    NEW YORK — Stocks rallied Friday to send Wall Street to its best day in six weeks.

    The S&P 500 rose 1.6% to cap its first winning week in the last four as relaxing yields in the bond market took some pressure off Wall Street. It’s found some stability following a swift rise and fall to start the year.

    The Dow Jones Industrial Average climbed 387 points, or 1.2%, while the Nasdaq composite jumped 2%.

    The central guidepost moving markets recently has been where inflation is heading and what the Federal Reserve will do about it.

    “I’d love to talk about other things, but the only things that matter are the Fed and trajectory of inflation,” said Amanda Agati, chief investment officer of PNC Asset Management.

    Early in the year, Wall Street rallied on hopes that cooling inflation would get the Fed to take it easier on its hikes to interest rates. Such increases can drive down inflation by slowing the economy, but they also raise the risk of a recession later on and hurt prices for investments.

    Last month, momentum swung and stocks fell after reports on the economy came in hotter than expected. They included data on the jobs market, consumer spending and inflation itself at multiple levels.

    The strong data raised concerns about continued upward pressure on inflation. That forced Wall Street to abandon hopes for rate cuts this year and raise its expectations for how high rates would go.

    On Friday, more data showed up to show the economy is in better shape than thought: Growth for services industries last month was a touch stronger than economists expected. That’s a good sign for the economy and helps calms worries about an imminent recession, particularly when manufacturing has been struggling. But it also could add pressure on inflation.

    Instead of sending stocks lower and yields higher, as stronger-than-expected data did much of last month, markets reacted in the opposite way.

    The yield on the 10-year Treasury fell back to 3.96% from 4.06% late Thursday. It’s a respite from its shot higher over the last month as expectations rose for a firmer Fed.

    Underneath the surface of the services report were some potentially encouraging bits for inflation. Prices are still rising for prices paid by services organizations, but the growth decelerated in February.

    “We started off the year with a delusional, deranged or even unhinged market rally that just made no sense at all,” Agati said. “That delusion is still sitting in the background clearly, even though we are starting to get some of that reality check.”

    She sees the Fed having to take interest rates even higher than the market is expecting because of how stubborn inflation has been. With corporate profits on the way down, and her expectation for even more declines because of a mild to moderate recession, she sees the stock market grinding lower before plateauing for a while and then gradually rising again, reminiscent of the shape of a bathtub.

    “It’s going to be a more extended tightening cycle,” Agati said. “Investors are so conditioned to high volatility and warp speed, they want everything to happen immediately. You see the market trying to price it in in one shot. It’s just going to take longer for the Fed to get out of the driver’s seat.”

    The next move by the Fed on interest rates is scheduled for later this month. Before then, reports on the strength of the job market and on inflation will likely have big impacts on the market and expectations for what the Fed will do.

    Last month, it dialed down the size of its rate increases and highlighted progress being made in the battle to get inflation lower. It also earlier suggested just two more increases to rates may be on the way. But the strong reports since then have raised worries that the Fed could not only hike at least three more times but also could dial back up the size of the increases.

    All the worries have come while expectations for corporate profits have been swinging lower. Still-high inflation and rates are eating into earnings for big companies. Retailers in particular have been saying they see some of their customers struggling.

    Costco Wholesale on Friday reported stronger profit for its latest quarter than expected, but its revenue fell short of forecasts. Its stock fell 2.1%.

    Shares of Silvergate Capital, a bank for crypto companies, swung sharply a day after more than halving. Crypto companies have been cutting off business with the bank, which warned earlier this week that it won’t be able to file its annual report with regulators in time and that it could be “less than well-capitalized.” After swinging from losses to gains, it ended the day 0.9% higher.

    On the winning side was Cooper Cos., a medical device maker that reported stronger profit and revenue than Wall Street expected. It climbed 7.3%.

    Broadcom gained 5.5% after it also beat expectations for quarterly profit and revenue.

    All told, the S&P 500 rose 64.29 points to 4,045.64. The Dow gained 387.40 to 33,390.97, and the Nasdaq jumped 226.02 to 11,689.01.

    ___

    AP Business Writers Joe McDonald and Matt Ott contributed.

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  • N. Korea wants more control over farming amid food shortage

    N. Korea wants more control over farming amid food shortage

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    North Korean leader Kim Jong Un vowed to strengthen state control over agriculture and take a spate of other steps to increase grain production, state media reported Thursday. But experts say it won’t effectively address a worsening food shortage.

    Kim’s measures unveiled during a recent four-day meeting were largely a repeat of his past policies. Prospects for quickly resolving its food insecurity are dim, as North Korea restricts the operation of markets and devotes much of its scarce resources to its nuclear program.

    While experts believe the food situation is the worst it has been under Kim’s 11-year rule, they still say they see no signs of imminent famine or mass deaths.

    During the ruling Workers’ Party meeting that ended Wednesday, Kim said his government sees agricultural development as a matter of “strategic” importance and that farming goals should be settled without fail, according to the official Korean Central News Agency.

    “In order to attain the gigantic long-term objective of rural development, it is necessary to decisively strengthen the party guidance over the agricultural sector and improve the rural party work,” Kim was quoted as saying.

    Kim also ordered officials to overcome unspecified “lopsidedness in the guidance on farming” and concentrate on increasing farm yields. He said provincial, city and county authorities must boost their guidance on agriculture.

    KCNA didn’t elaborate how Kim wants to reinforce his government’s guidance on farming. But experts say Kim’s instructions were a reaffirmation of his push to restore elements of a socialist-style planned economy — under which a central authority controls the market rather than participants — on grain supply. They say that’s one of the factors behind North Korea’s worsened food situation.

    “In our views, they’re going backward and returning to the past,” said Kwon Tae-jin, a senior economist at the private GS&J Institute in South Korea. “To resolve the food problem, they should let markets play a greater role. But they’re rather returning to a planned economy.”

    North Korea’s state rationing system remains largely broken since a crippling famine killed an estimated hundreds of thousands of people in the mid-1990s. The country had since tolerated some levels of open market activities, a move that experts say has helped the North achieve a slow, modest economic growth but could eventually pose a threat to its authoritarian leadership by the Kim family.

    North Korea’s chronic economic difficulties and food insecurity have deepened with toughened United Nations sanctions, the COVID-19 pandemic that decimated its external trade, and the North’s own mismanagement.

    Further aggravating its food shortage was authorities’ unsuccessful attempts to supply grain via state-run facilities while restricting private dealings at markets. Other factors attributed to the food shortage include dwindling personal incomes and sharply decreased unofficial grain purchases from China due to the pandemic curbs, Kwon said.

    “Market participants are still very cautiously acting, so the volume of grain at markets hasn’t increased much,” Kwon said. “If authorities view markets negatively, they can’t be properly recovered.”

    Lim Eul-chul, a professor at Kyungnam University’s Institute for Far Eastern Studies in Seoul, said the latest North Korean meeting was meant to review the progress in existing long-term strategies to improve national food production, remind officials of related goals and discuss ways to implement them.

    But he said there was still no description of meaningfully new strategies or direction.

    North Korea’s 2022 grain production was estimated at 4.5 million tons, a 3.8% drop from a year earlier, according to South Korean assessments. In the previous decade, its annual production was an estimated 4.4 million to 4.8 million tons. South Korea’s spy agency has said North Korea needs 5.5 million tons of grain to feed its 25 million people each year.

    Previous plenary meetings mostly concentrated on the country’s nuclear program or rivalries with the United States and South Korea. Holding an agriculture-focused plenary meeting of the party’s Central Committee could be an acknowledgement the food situation is serious. But some experts say the country also likely aims to burnish Kim’s image as a leader caring for his people and boost domestic support of his push to expand his nuclear arsenal.

    During the meeting, Kim called for faster construction of new irrigation systems that would help the country cope with extreme weather conditions brought by climate change. He also called for manufacturers to build and supply more efficient farming machines and for workers to accelerate their efforts to convert more tideland into farmland.

    Kim said that all state sectors and units must provide “mental and moral, material and technical support and assistance to the rural communities.” He reiterated his calls for greater internal unity behind his leadership to attain agricultural goals.

    “It is difficult to be optimistic about the food supply as long as Pyongyang insists on implementing North Korean-style socialism and isolating the country from international trade and assistance while developing nuclear missiles,” Leif-Eric Easley, a professor at Ewha University in Seoul, said.

    While North Korea is about 1 million tons of grain short of sufficient annual levels, Lim said that such degrees of shortages have not resulted in mass famines in the past. Kwon said food is still available at markets, though at expensive prices.

    “It’s like very poor people are starving but the government won’t let them die of hunger. Things could continue like that,” Kwon said.

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  • Reata, Dycom rise; Novavax, Ambarella fall

    Reata, Dycom rise; Novavax, Ambarella fall

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    Stocks that traded heavily or had substantial price changes Wednesday: Reata, Dycom rise; Novavax, Ambarella fall

    NEW YORK — Stocks that traded heavily or had substantial price changes Wednesday:

    Monster Beverage Corp., down $2.57 to $99.19.

    The energy drink maker reported weak fourth-quarter results.

    Ambarella Inc., down $10.84 to $83.47.

    The video-compression chipmaker’s revenue forecast fell short of Wall Street expectations.

    Novavax Inc., down $2.40 to $6.86.

    The vaccine maker warned investors about its ability to remain in business.

    Payoneer Global Inc., up 80 cents to $6.60.

    The global payments company gave investors a strong revenue forecast.

    Reata Pharmaceuticals Inc., up $62 to $93.17.

    The biopharmaceutical company’s treatment for Friedreich’s ataxia, a rare disease, received U.S. regulatory approval.

    Dycom Industries Inc., up $12.81 to $97.02.

    The provider of specialty contracting services reported strong fourth-quarter financial results.

    First Solar Inc., up $26.54 to $195.68.

    The solar power systems company beat analysts’ fourth-quarter earnings forecasts.

    Sarepta Therapeutics Inc., up $23.50 to $145.63.

    The biopharmaceutical company’s fourth-quarter earnings and revenue beat analysts’ forecasts.

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  • Asian shares, oil advance on strong China factory data

    Asian shares, oil advance on strong China factory data

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    TOKYO — Asian shares were higher Wednesday after reports on key measures of China manufacturing showed a strong recovery after anti-virus controls were lifted late last year.

    Hong Kong’s Hang Seng index jumped 3.8% and Shanghai gained 1%.

    Purchasing managers’ indexes issued by a business magazine, Caixin, and the official China Federation of Logistics & Purchasing showed gains in production, exports and new orders.

    Business activity is recovering after the ruling Communist Party ended stringent anti-virus restrictions in early December. That followed a slump in activity that dragged last year’s economic growth to 3%, its second-lowest level since at least the 1970s.

    That was good news in Hong Kong, where the Hang Seng gained more than 750 points to 20,552.60.

    Hong Kong’s own outlook has improved as it also has relaxed pandemic precautions. The territory’s chief executive, John Lee, announced Tuesday t hat masks will no longer be required both outdoors and indoors, but some high-risk areas including hospitals and elderly homes can still require their use.

    The Shanghai Composite added 32 points to 3,312.35. South Korean markets were closed for a national holiday.

    Japan’s benchmark Nikkei 225 picked up 0.3% in afternoon trading to 27,516.53. Australia’s S&P/ASX 200 edged nearly 0.1% lower to 7,251.60.

    Wall Street closed out a frigid February with more losses on Tuesday. The S&P 500 lost 0.3%, locking in a loss of 2.6% for the month and closing at 3,970.15. The Dow fell 0.7% to 32,656.70 while the Nasdaq edged 0.1% lower to 11,455.54. Both also sank over the month.

    Investors are keeping an eye on the last of the earnings reports for this season. Several big-name retailers are still on the schedule for this week.

    “The consumer and inflation are in focus over the next few days. After last week’s drubbing among retail stocks, the worst since June last year, some upbeat earnings results from Target should buoy the group,” said Brian Overby, senior market strategist at Ally, while warning that more volatility may be in store later this week.

    After a strong start to the year driven by hopes inflation is abating, Wall Street shifted into reverse in February. A stream of data showed inflation and the overall economy are remaining more resilient than expected. That’s forced investors to raise their forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there.

    High rates can drive down inflation, but they also raise the risk of a recession down the line because they hurt the economy. They also drag on prices for stocks and other investments.

    Heightened expectations for rates sent yields jumping in the bond market Tuesday. The yield on the 10-year Treasury held steady at 3.92%. It helps set rates for mortgages and other loans that shape the economy’s health, and still near its highest level since November. The two-year yield, which moves more on expectations for Fed action, ticked up to 4.81% from 4.78%. It’s near its highest level since 2007.

    Reports on the economy released Tuesday showed some slight cracks. One said that confidence among U.S. consumers fell in February. Another said that manufacturing in the Chicago region weakened by more than expected.

    In energy trading, benchmark U.S. crude added 54 cents to $77.59 in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, rose 58 cents to $84.03 a barrel.

    In currency trading, the U.S. dollar inched up to $136.33 Japanese yen from $136.20 yen. The euro rose to $1.0610 from $1.0583.

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  • Asian shares, oil advance on strong China factory data

    Asian shares, oil advance on strong China factory data

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    TOKYO — Asian shares were higher Wednesday after reports on key measures of China manufacturing showed a strong recovery after anti-virus controls were lifted late last year.

    Hong Kong’s Hang Seng index jumped 3.3% and Shanghai gained 0.9%.

    Purchasing managers’ indexes issued by a business magazine, Caixin, and the official China Federation of Logistics & Purchasing showed gains in production, exports and new orders.

    Business activity is recovering after the ruling Communist Party ended stringent anti-virus restrictions in early December. That followed a slump in activity that dragged last year’s economic growth to 3%, its second-lowest level since at least the 1970s.

    That was good news in Hong Kong, where the Hang Seng gained more than 700 points to 20,486.79.

    Hong Kong’s own outlook has improved as it also has relaxed pandemic precautions. The territory’s chief executive, John Lee, announced Tuesday t hat masks will no longer be required both outdoors and indoors, but some high-risk areas including hospitals and elderly homes can still require their use.

    The Shanghai Composite added 28 points to 3,308.53. South Korean markets were closed for a national holiday.

    Japan’s benchmark Nikkei 225 picked up 0.3% to 27,523.17. Australia’s S&P/ASX 200 edged up 0.1% to 7,263.10.

    Wall Street closed out a frigid February with more losses on Tuesday. The S&P 500 lost 0.3%, locking in a loss of 2.6% for the month and closing at 3,970.15. The Dow fell 0.7% to 32,656.70 while the Nasdaq edged 0.1% lower to 11,455.54. Both also sank over the month.

    Investors are keeping an eye on the last of the earnings reports for this season. Several big-name retailers are still on the schedule for this week.

    “The consumer and inflation are in focus over the next few days. After last week’s drubbing among retail stocks, the worst since June last year, some upbeat earnings results from Target should buoy the group,” said Brian Overby, senior market strategist at Ally, while warning that more volatility may be in store later this week.

    After a strong start to the year driven by hopes inflation is abating, Wall Street shifted into reverse in February. A stream of data showed inflation and the overall economy are remaining more resilient than expected. That’s forced investors to raise their forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there.

    High rates can drive down inflation, but they also raise the risk of a recession down the line because they hurt the economy. They also drag on prices for stocks and other investments.

    Heightened expectations for rates sent yields jumping in the bond market Tuesday. The yield on the 10-year Treasury held steady at 3.92%. It helps set rates for mortgages and other loans that shape the economy’s health, and still near its highest level since November. The two-year yield, which moves more on expectations for Fed action, ticked up to 4.81% from 4.78%. It’s near its highest level since 2007.

    Reports on the economy released Tuesday showed some slight cracks. One said that confidence among U.S. consumers fell in February. Another said that manufacturing in the Chicago region weakened by more than expected.

    In energy trading, benchmark U.S. crude added 48 cents to $77.53 in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, rose $0.52 to $83.97 a barrel.

    In currency trading, the U.S. dollar inched up to $136.37 Japanese yen from $136.20 yen. The euro rose to $1.0596 from $1.0583.

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  • World shares mixed after slight gains on Wall Street

    World shares mixed after slight gains on Wall Street

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    BANGKOK — Shares were lower in Europe on Tuesday after a mixed session in Asia following a reprieve on Wall Street from selling pressure driven by worries over inflation and interest rates.

    U.S. futures declined and oil prices advanced. Benchmarks rose in Tokyo, Seoul and Shanghai but fell in London, Paris and Frankfurt.

    Investors are jittery as analysts raise forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there to tame inflation that has failed to fall as much as expected.

    Economies around the world have remained more resilient than feared, with China loosening its business-damaging anti-COVID restrictions and Europe avoiding a worst-case energy crisis.

    “As we move into ‘Turnaround Tuesday,’ investors are debating whether January’s inflation reflation was just another temporary bump in the road as the economy adjusts to a post-pandemic world,” Stephen Innes of SPI Asset Management said in a report. “The post-pandemic era continues to deliver unusual macroeconomic patterns.”

    Germany’s DAX lost 0.5% to 15,296.37 and the CAC 40 in Paris dropped 0.6% to 7,255.12. Britain’s FTSE 100 lost 0.5% to 7,894.13. The futures for the S&P 500 and the Dow Jones Industrial Average were 0.3% lower.

    In Asian trading, Tokyo’s Nikkei 225 index added 0.1% to 27,445.56 and the Kospi in Seoul advanced 0.4% to 2,412.85.

    Hong Kong’s Hang Seng shed 0.8% to 19,785.94, while the Shanghai Composite index surged 0.7% to 3,279.61. Australia’s S&P/ASX 200 rose 0.5% to 7,258.40.

    Shares in Mumbai fell 0.6% while Bangkok’s SET index slipped 0.4%.

    Stocks have struggled in February after a strong start to the year. Robust economic data help calm fears that a recession may be imminent given the dampening impact of more costly borrowing on spending by consumers and businesses.

    But they likely mean a longer spell of higher interest rates. The heightened expectations for rates have been most evident in the bond market, where yields have shot higher in recent weeks.

    Earlier, analysts thought the Fed might soon ease back. Now the expectation is that it might raise rates above 5.25%. The Fed’s key overnight rate is now in a range of 4.50% to 4.75%, up from virtually zero at the start of last year.

    On Monday, the S&P 500 rose 0.3% and the Dow industrials gained 0.2%. The Nasdaq composite climbed 0.6%.

    Even with the worries about rates going higher than expected, the S&P 500 is still holding onto a gain of 3.7% for the year so far, and shoppers are still continuing to spend at stores. Both can add upward pressure on inflation.

    Most companies have already reported their results for the last three months of 2022. Among the couple dozen companies in the S&P 500 still scheduled to report this week are Advance Auto Parts, Kroger and Target.

    Overall, this earnings reporting season has been lackluster. Companies in the S&P 500 are on track to report their first drop in earnings per share from a year earlier since the summer of 2020, according to FactSet.

    In other trading Tuesday, U.S. benchmark crude oil gained 65 cents to $76.33 per barrel in electronic trading on the New York Mercantile Exchange.

    Brent crude, the pricing basis for international trading, picked up 62 cents to $82.66 per barrel.

    The U.S. dollar rose to 136.77 Japanese yen from 136.20 yen. The euro was unchanged at $1.0609.

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  • Stocks drop, send Wall Street to its worst week of the year

    Stocks drop, send Wall Street to its worst week of the year

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    NEW YORK (AP) — Another cold reminder that inflation remains hotter than hoped sent Wall Street skidding Friday, and stocks closed out their worst week since early December.

    The S&P 500 fell 1.1% to cap its third straight weekly loss. The Dow Jones Industrial Average dropped as many as 510 points before closing down 336 points, or 1%, while the Nasdaq composite lost 1.7%.

    Stocks have dropped through February as a stream of reports have shown everything from inflation to the job market to spending by shoppers is staying hotter than expected. That’s forced Wall Street to raise its forecasts for how high the Federal Reserve will have to take interest rates and then how long to keep them there.

    Higher rates can drive down inflation, but they also raise the risk of a recession because they slow the economy. They likewise hurt prices for stocks and other investments.

    The latest reminder came Friday after a report showed that the measure of inflation preferred by the Fed came in higher than expected. It said prices were 4.7% higher in January than a year earlier, after ignoring costs for food and energy because they can swing more quickly than others. That was an acceleration from December’s inflation rate, showing the wrong momentum, and it was higher than economists’ expectations for 4.3%.

    It echoed other reports from earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.

    Other data Friday showed that consumer spending returned to growth in January, rising 1.8% from December. That’s pivotal because spending by consumers makes up the largest piece of the economy. A separate reading on sentiment among consumers came in slightly stronger than earlier thought, while sales of new homes improved a bit more than expected.

    Such strength paired with the remarkably resilient job market raises hope that the economy can avoid a recession in the near term.

    But it can also feed into upward pressure on inflation, and Wall Street worries it could push the Fed to raise rates even higher and keep them there even longer than it otherwise would.

    “It puts the final nail in the coffin in the shift we’ve seen the last several weeks where the market has come around to what the Fed has been saying for a while: rates above 5% and there for longer,” said Ross Mayfield, investment strategy analyst at Baird.

    After earlier doubting that the Fed would raise its key overnight rate as high as it was saying, and believing that it may even cut rates later this year, traders are increasing bets on the Fed’s rate rising to at least 5.25% and staying that high through the end of the year.

    It’s currently in a range of 4.50% to 4.75%, and it was at virtually zero a year ago.

    High rates and inflation increase the risk of a recession down the line, even if the most important part of the economy has been resilient.

    “The consumer is hanging in there, but the consensus seems to be there’s a lot of trading down” by shoppers to less-expensive items, Mayfield said. “If you’re looking out a year and banking on the consumer sector to hang in there, every extra month it becomes a dicier proposition.”

    He expects the economy’s growth to fall below its long-term trend if not fall into a minor recession, though he’s not anticipating a worst-case downturn.

    Expectations for a firmer Fed have caused yields in the Treasury market to shoot higher this month, and they climbed further Friday.

    The yield on the 10-year Treasury rose to 3.94% from 3.89% late Thursday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.79% from 4.71% and is near its highest level since 2007.

    Tech and high-growth stocks once again took the brunt of the pressure. Investments seen as the most expensive, riskiest or making their investors wait the longest for big growth are among the most vulnerable to higher rates.

    Microsoft, Apple Amazon and Tesla all fell at least 1.8% and were the heaviest weights on the S&P 500 because their immense size gives them more sway on the index.

    Software company Autodesk fell to the largest loss in the index, down 12.9% despite reporting stronger profit and revenue for the latest quarter than expected. Analysts said investors were disappointed with its forecasts for upcoming results.

    Boeing lost 4.8% after it stopped deliveries of its 787 passenger jet because of questions around a supplier’s analysis of a part near the front of the plane.

    All told, the S&P 500 fell 42.28 points to 3,970.04. The Dow dropped 336.99 to 32,816.92, and the Nasdaq fell 195.46 to 11,394.94.

    Stock markets abroad also mostly fell, with a 1.8% drop for France’s main index and 1.7% fall in Hong Kong.

    Japan’s Nikkei 225 was an outlier, rising 1.3%. The nominee to head the country’s central bank, economist Kazuo Ueda, told lawmakers he favors keeping Japan’s benchmark interest rate near zero to ensure stable growth. That’s despite Japan reporting its core consumer price index, excluding volatile fresh foods, rose the most in 41 years in January.

    ___

    AP Business Writers Elaine Kurtenbach, Matt Ott and Yuri Kageyama contributed.

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  • Asian shares track Wall Street decline on hot economic data

    Asian shares track Wall Street decline on hot economic data

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    BANGKOK — Shares fell Monday in Asia after Wall Street benchmarks closed out their worst week since early December. U.S. futures edged higher while oil prices fell.

    Reports on inflation, the jobs market and retail spending have come in hotter than expected, leading analysts to raise forecasts for how high the Federal Reserve will have to take interest rates to slow the U.S. economy and cool inflation.

    Higher rates pressure business activity and investment prices. So far, they do not seem to be slowing growth as much as anticipated. The S&P 500 fell 1.1% Friday to cap its third straight loss.

    “It is becoming increasingly apparent that inflation, and associated inflation expectations and wage pressures, will not decline in a predictable linear manner,” Mizuho Bank said in a commentary. “Early trading on Monday suggests that risk aversion has been brought forward to Asian markets.”

    Tokyo’s Nikkei 225 index edged 0.2% lower to 27,403.42 and the Kospi in Seoul gave up 1.1% to 2,395.74.

    In Hong Kong, the Hang Seng lost 0.8% to 18, 860.91 while the Shanghai Composite index was down 0.1% at 3,263.38. Australia’s S&P/ASX 200 shed 1.3% to 7,210.30.

    Bangkok was 0.3% lower while the Sensex in Mumbai dropped 0.7%.

    On Friday, the S&P 500 closed at 3,970.04. The Dow Jones Industrial Average dropped 1% to 32,816.92, while the Nasdaq composite lost 1.7% to 11,394.94.

    Higher rates can drive down inflation, but they raise the risk of a recession.

    The measure of inflation preferred by the Fed, reported Friday, said prices were 4.7% higher in January than a year earlier, after ignoring costs for food and energy because they can swing more quickly than others. That was an acceleration from December’s inflation rate and was higher than economists’ expectations for 4.3%.

    It echoed other reports earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.

    Other data Friday showed that consumer spending, the biggest piece of the economy, returned to growth in January, rising 1.8% from December. A separate reading on sentiment among consumers came in slightly stronger than earlier thought, while sales of new homes improved a bit more than expected.

    Such strength paired with the remarkably resilient job market raises the likelihood the economy might avoid a recession in the near term.

    Tech and high-growth stocks once again took the brunt of the pressure. Investments seen as the most expensive, riskiest or making their investors wait the longest for big growth are among the most vulnerable to higher rates.

    Traders are increasing bets on the Fed raising its benchmark rate to at least 5.25% and keeping it that high through the end of the year. It’s currently in a range of 4.50% to 4.75%, and it was at virtually zero a year ago.

    Expectations for a firmer Fed have caused yields in the Treasury market to shoot higher this month, and they climbed further Friday.

    The yield on the 10-year Treasury was steady at 3.94%, up from 3.89% late Thursday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.79% from 4.71% and is near its highest level since 2007.

    In other trading Monday, U.S. benchmark crude oil lost 15 cents to $76.17 per barrel in electronic trading on the New York Mercantile Exchange. It gained 93 cents to $76.32 per barrel. Brent crude oil, the pricing basis for international trading, shed 25 cents to $82.57 per barrel.

    The dollar rose to 136.33 Japanese yen from 136.45 yen. The euro slipped to $1.0546 from $1.0549.

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  • Buffett touts benefits of buybacks in his shareholder letter

    Buffett touts benefits of buybacks in his shareholder letter

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    OMAHA, Neb. — Billionaire Warren Buffett said critics of stock buybacks are “either an economic illiterate or a silver-tongued demagogue” or both, and all investors benefit from them as long as they are made at the right prices.

    Buffett used part of his annual letter to Berkshire Hathaway shareholders Saturday to tout the benefits of repurchases that fiery Wall Street critics like Sens. Elizabeth Warren and Bernie Sanders and many other Democrats love to criticize. The federal government even added a 1% tax on buybacks this year after they ballooned to roughly $1 trillion in 2022.

    “When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive),” wrote Buffett, who himself is a long-time Democrat.

    Investor Cole Smead said Washington, D.C., should take note of Buffett’s view on buybacks.

    “Any politician, regardless of the aisle side, should stand up and be at attention to a statement like that,” said Smead, who is with Phoenix-based Smead Capital Management.

    Buffett used his typical self-deprecating style to say Berkshire’s remarkable record of doubling the returns of the S&P 500 over the last 58 years with him at the helm is the result of only “about a dozen truly good decisions – that would be about one every five years.”

    He recounted a few of those in his letter, but kept his message — which has long been one of the best-read documents in the business world — remarkably brief this year at a little over eight pages. And he devoted an entire page to a tribute to his 99-year-old partner Charlie Munger.

    “I think investors — whether they be investors in Berkshire or just students of Berkshire — look to him for more and I think they may come away wanting more,” CFRA Research analyst Cathy Seifert said.

    Buffett pointed out how much Berkshire benefits from dividends that it receives from the huge investments in its portfolio like Coca-Cola and American Express even though he refuses to pay a dividend at the Omaha, Nebraska-based conglomerate he leads because he believes he can generate a bigger return for shareholders by investing that cash. Coke paid Berkshire $704 million in dividends last year and American Express added $302 million, and those payments helped push the value of those stakes to $25 billion for Coke and $22 billion for American Express. Berkshire paid $1.3 billion for each of those investments in the 1990s.

    Buffett said the key lesson for investors is that “it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.”

    Berkshire said its’ fourth-quarter profit fell sharply to $18.2 billion from $39.6 billion a year earlier as the paper value of its investments fell.

    So those bottom line numbers were again distorted by the value of Berkshire’s sizeable stock portfolio. That’s why Buffett maintains that operating earnings are a better measure of Berkshire’s performance because they exclude derivatives and investments. But by that measure, Berkshire’s operating earnings also declined to $6.7 billion, or $4,584.46 per Class A share, from the previous year’s $7.3 billion, or $4,904.23 per Class A share.

    That’s well below what Wall Street predicted. The three analysts surveyed by FactSet predicted Berkshire would report operating earnings per Class A share of $5,305.83 on average.

    Analysts said that overall the results were still strong, but higher claims costs continued to hurt Geico’s results while railroad traffic slowed at BNSF and rising interest rates hurt several of Berkshire’s businesses that are tied to the housing market, like its nationwide network of Realtors and its Clayton Homes manufacturing housing unit.

    Berkshire’s performance tends to follow whatever the U.S. economy is doing because so many of its dozens of manufacturing, utility and retail businesses follow those trends. In many ways, the conglomerate is a barometer of the economy.

    Whenever Buffett sees opportunities, Berkshire continues to invest in whole companies and stocks. He was particularly aggressive last year when he made a net investment of roughly $53 billion by the calculations of Edward Jones analyst Jim Shanahan. Much of that went into stock of oil producers Occidental Petroleum and Chevron and last fall’s $11.6 billion acquisition of Alleghany Corp. insurance.

    But even with all that spending, Berkshire’s cash hoard grew to $128.6 billion at the end of the year, up from $109 billion at the end of the third quarter. Berkshire’s businesses generate so much cash that it piles up quicker than Buffett can invest it.

    At the start of this year, Berkshire boosted its stake in the Pilot Flying J network of 750 truck stops to 80%, up from the 38.6% it acquired in 2017, so that will help this year’s earnings.

    ___

    This story has been corrected to show that Smead Capital Management is based in Phoenix, not Seattle.

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  • Wall Street tumbles toward worst week since early December

    Wall Street tumbles toward worst week since early December

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    NEW YORK — Stocks are tumbling on Wall Street Friday as dispiriting evidence keeps piling up to show inflation isn’t cooling as quickly as hoped.

    The S&P 500 was 1.6% lower in morning trading and on track for its worst week since early December. The Dow Jones Industrial Average was down 451 points, or 1.4%, at 32,702, as of 10:19 a.m. Eastern time, while the Nasdaq composite was 2% lower.

    Stocks have dropped through February as a stream of reports have shown everything from inflation to the job market to spending by shoppers is staying hotter than expected. That’s forced Wall Street to raise its forecasts for how high the Federal Reserve will have to take interest rates and then how long to keep them there.

    Higher rates can drive down inflation, but they also raise the risk of a recession because they slow the economy. They likewise hurt prices for stocks and other investments.

    The latest reminder came Friday after a report showed that the measure of inflation preferred by the Fed came in higher than expected. It said prices were 4.7% higher in January than a year earlier, after ignoring costs for food and energy because they can swing more quickly and sharply than others. That was an acceleration from December’s inflation rate, showing the wrong momentum, and it was higher than economists’ expectations for 4.3%.

    It echoed other reports from earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.

    Other data Friday showed that consumer spending returned to growth in January, jumping 1.8% from December. That’s pivotal because spending by consumers makes up the largest piece of the economy. A separate reading on sentiment among consumers came in slightly stronger than expected, while sales of new homes improved a bit more than expected.

    Such strength paired with the remarkably resilient job market raises hope that the economy can avoid a recession in the near term.

    But it can also feed into upward pressure on inflation, and Wall Street worries it could push the Fed to raise rates even higher and keep them there even longer than it otherwise would. Investors’ hopes for a possible cut to rates later this year have been washing out of the market.

    Traders are now also placing bets on the Fed raising its key overnight rate above 5.25% and keeping them there through the end of the year. That’s higher than what the Fed was talking about in December.

    Expectations for a firmer Fed have caused yields in the Treasury market to shoot higher this month, and they climbed further Friday.

    The yield on the 10-year Treasury rose to 3.95% from 3.89% late Thursday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.78% from 4.71%.

    Tech and high-growth stocks once again took the brunt of the pressure. Investments seen as the most expensive, riskiest or making their investors wait the longest for big growth are among the most vulnerable to higher rates.

    Apple, Microsoft, Amazon, Tesla and Nvidia all fell more than 2% and were among the heaviest weights on the S&P 500.

    They were among plenty of company amid Wall Street’s wipeout. More than 90% of stocks in the S&P 500 fell.

    Software company Autodesk had one of the largest losses in the index, falling 10.6% despite reporting stronger profit and revenue for the latest quarter than expected. Analysts said investors were disappointed with its forecasts for upcoming results.

    Boeing lost 4.4% after it again stopped deliveries of its 787 passenger jet because of questions around a supplier’s analysis of a part near the front of the plane.

    Stock markets abroad also mostly fell, with a 1.1% drop for France’s main index and 1.7% fall in Hong Kong.

    Japan’s Nikkei 225 was an outlier, rising 1.3%. The nominee to head the country’s central bank, economist Kazuo Ueda, told lawmakers he favors keeping Japan’s benchmark interest rate near zero to ensure stable growth. That’s despite Japan reporting its core consumer price index, excluding volatile fresh foods, rose the most in 41 years in January.

    ___

    AP Business Writers Elaine Kurtenbach, Matt Ott and Yuri Kageyama contributed.

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  • Word stocks mixed after Wall St breaks losing streak

    Word stocks mixed after Wall St breaks losing streak

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    BANGKOK — Shares rose in early European trading after closing mostly lower in Asia ahead of the release of consumer price data in the U.S.

    Benchmarks advanced in Paris, London, Tokyo and Sydney but fell in Hong Kong, Shanghai and Seoul. Oil prices rose while U.S. futures edged lower.

    Friday will bring the core U.S. personal consumption expenditure, or PCE price index, which measures changes in prices of consumer goods and services, excluding food and energy. Forecasts are for moderate increases as steep inflation abates in response to easing supply chain issues and higher interest rates.

    Germany’s DAX edged 0.1% higher to 15,488.24 and the CAC 40 in Paris added 0.2% to 7,331.57. Britain’s FTSE 100 gained 0.3% to 7,928.14. The future for the Dow Jones Industrial Average slipped 0.2% while that for the S&P 500 was down 0.3%.

    Japan reported its core consumer price index, excluding volatile fresh foods, rose the most in 41 years in January. But the nominee to head its central bank, economist Kazuo Ueda, told lawmakers he favors keeping Japan’s benchmark interest rate near zero to ensure stable growth.

    Ueda is expected to succeed BOJ Gov. Haruhiko Kuroda when he steps down in April after two 5-year terms marked by unprecedented easing. The change of leadership has prompted speculation about a possible change in the ultra-lax monetary stance, though Ueda sought to dispel such expectations.

    Wages in Japan have failed to keep pace with price increases, and worries over a potential global recession have left the BOJ wary of altering course.

    “Time is needed before the effects of monetary policy kick in,” Ueda told Parliament, noting the price rises are peaking.

    Tokyo’s Nikkei 225 index added 1.3% to 27,453.48 and the S&P/ASX 200 in Australia gained 0.3% to to 7,307.00.

    In Hong Kong, the Hang Seng index lost 1.7% to 20,010.04 while the Shanghai Composite index gave up 0.6% to 3,267.16. South Korea’s Kospi lost 0.6% to 2,423.61.

    India’s Sensex fell 0.4% and shares also fell in Taiwan and Bangkok.

    On Thursday, the S&P 500 rose 0.5% for its first gain in five days, while the Dow industrials advanced 0.3%. The Nasdaq composite surged 0.7%.

    Tech and high-growth stocks have struggled recently because of worries about rising interest rates. They’re seen as some of the most vulnerable as the Federal Reserve jacks rates higher to try to curb inflation.

    High rates hurt prices for investments, particularly those seen as the riskiest, the most expensive or those whose big growth is in the future. They also raise the risk of a recession because they slow the economy.

    A lengthening list of reports have shown the U.S. economy is in stronger shape than expected, raising hopes a recession can be avoided. But that’s also forced Wall Street to raise its forecasts for how high the Fed will take interest rates and how long it will keep them there.

    Fewer workers applied for unemployment benefits last week than expected, the latest indication the job market remains resilient. A separate report said economic growth was likely a touch weaker in the last three months of 2022 than earlier estimated. But the U.S. economy still grew at a 2.7% annual rate.

    Wall Street’s heightened expectations for rates and the Fed have been most evident in the bond market, where Treasury yields have shot higher this month. They eased a bit on Thursday, taking some of the pressure off stocks.

    The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, dipped to 3.86% early Friday from 3.93% late Wednesday. Earlier this week, it topped 3.95%, approaching its highest level since November.

    In other trading Friday, U.S. benchmark crude oil gained 73 cents to $76.12 per barrel in electronic trading on the New York Mercantile Exchange.

    Brent crude, the pricing basis for international trading, picked up 75 cents to $82.70 per barrel.

    The U.S. dollar rose to 135.15 Japanese yen from 134.70 yen. The euro fell to $1.0589 from $1.0596.

    ———

    AP Business Writer Yuri Kageyama contributed.

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  • Beyond Meat beats Q4 forecasts despite flagging sales

    Beyond Meat beats Q4 forecasts despite flagging sales

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    Beyond Meat on Thursday reported better-than-expected fourth quarter sales despite flagging consumer demand and lower prices.

    The plant-based meat maker said its revenue fell 21% to $80 million in the October-December period. Still, that beat Wall Street’s expectations. Analysts polled by FactSet were forecasting revenue of $75.8 million.

    Beyond Meat’s shares jumped 14% in after-hours trading.

    The El Segundo, California-based maker of plant-based burgers, sausages, nuggets and other products said its sales volumes continued to decline despite price cuts in the U.S. and Europe. The strong dollar also hurt profits from abroad, the company said.

    Beyond Meat’s net loss narrowed to $66.9 million for the quarter, or $1.05 per share. That also beat Wall Street’s forecast of a $1.18 per-share loss.

    Beyond Meat President and CEO Ethan Brown said the company is seeing progress in its drive to cut costs and manufacturing complexity. Beyond Meat cut 200 jobs __ or 19% of its workforce __ in October and has narrowed its North American contract manufacturers from eight to three. It also reduced inventory.

    Those savings __ along with easing costs for raw ingredients __ should help Beyond Meat tackle one of its most persistent problems: the high cost of its products relative to animal-based meat. On Thursday, Walmart was advertising Beyond Meat burgers at $9.68 per pound; lean ground beef was $5.86 per pound.

    High prices were one the reasons for a broader slowdown in demand for fresh plant-based meats like burger patties and sausages last year, as shoppers confronted overall inflation at the grocery. U.S. sales of fresh meat alternatives fell 11% in 2022, wiping out the 11% gain they had seen in 2021, according to NielsenIQ.

    Brown said the “drummed-up misperception” that plant-based meats are over-processed and unhealthy has also hurt sales, and the company intends to do more marketing and outreach to consumers about the health benefits of a plant-based diet, including lower cholesterol.

    Brown also said Beyond Meat plans new products with improved taste this year. The company got a boost this month when McDonald’s introduced plant-based McNuggets in Germany. The McNuggets are the second product McDonald’s has co-produced with Beyond Meat; it also sells a McPlant burger in several European markets.

    “This category will win over time on three things. It will win around taste. It will win around a proper understanding of the health benefits that our products provide. And on price,” Brown told investors during a conference call Thursday.

    Beyond Meat said it expects net revenue in the range of $375 million to $415 million this year, which would be lower than the $418 million in reported in 2022.

    The company said grocery price inflation and concerns about a recession could hurt sales in the first half, but it should see some improvement as the year progresses.

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  • US stocks edge higher after worst rout in two months

    US stocks edge higher after worst rout in two months

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    NEW YORK — Stocks edged higher on Wall Street Wednesday, a day after falling to their worst loss since December on worries about higher interest rates.

    The S&P 500 rose 0.3% after drifting earlier between small gains and losses. The Dow Jones Industrial Average was up 77 points, or 0.2%, at 33,210, as of 12:58 p.m. Eastern time, while the Nasdaq composite was up 0.4%.

    After leaping at the start of the year, stocks hit a wall in February on worries that inflation may not be cooling as quickly or as smoothly as hoped. That has Wall Street upping its forecasts for how high the Federal Reserve will take interest rates, as well as for how long it will keep them at that level.

    High rates can help drive down inflation, but they raise the risk of a recession because they slow the economy. They also hurt investment prices.

    Yields in the Treasury market have shot higher this month after several stronger-than-expected reports on the economy forced the recalibration by Wall Street, which had earlier built bets that easing inflation would get the Fed to take it easier on interest rates soon.

    The yield on the 10-year Treasury is near its highest level since November. It pulled back a bit from its surge on Tuesday, dipping to 3.91% from 3.95%. That helped take some pressure off stocks on Wednesday.

    The two-year yield, which moves more on expectations for the Fed, fell to 4.68% from 4.73%. It’s also been near its highest level since November. If it tops that level, it would be at its highest since 2007.

    Traders have in recent weeks reduced bets that the Fed could cut rates later this year. Now they’re in closer alignment with what Fed officials have been telling the market for months, if not preparing for even more.

    Investors are penciling in at least two more rate hikes of 0.25 percentage points. They’re even talking about the possibility that the Fed may consider going back to increases of 0.50 points.

    The Fed has brought its main overnight rate up to a range of 4.50% to 4.75%, up from virtually zero at the start of last year, in its drive to stamp out high inflation. It’s also said it envisions no cuts to rates this year.

    It will release the minutes from its last policy meeting in the afternoon, which could cause more swings for markets.

    Its next move on rates will be next month. Traders see a nearly four-in-five chance that the Fed will raise rates by 0.25 points, according to CME Group. They see a 21% chance of a hike of 0.50 points. A month ago, traders had a similar amount of bets saying the Fed wouldn’t raise rates at all in March.

    A relatively lackluster earnings reporting season for big U.S. companies is winding down, and some of Wednesday’s biggest losers dropped despite reporting better results for the latest quarter than expected. That’s because investors have been putting more emphasis on what companies say about their upcoming results, with worries high about rising costs and high inflation eating into profits.

    Charles River Laboratories dropped 13.6% despite topping forecasts for the latest quarter. It said it received a U.S. Justice Department subpoena related to shipments of non-human primates that the company received from its supplier in Cambodia. The company said it voluntarily suspended such shipments, which pushed it to cut its forecast for revenue this upcoming year.

    Keysight Technologies tumbled 13.9% for the largest loss in the S&P 500 despite also reporting stronger profit and revenue for the latest quarter than expected. Analysts pointed to its reporting of softer orders than forecast.

    On the winning side was Diamondback Energy, which rose 2.9% after it reported a stronger profit for its latest quarter than analysts expected.

    ___

    AP Business Writers Yuri Kageyama and Matt Ott contributed.

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