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Tag: Stocks and bonds

  • Stocks tick higher after another dizzying day on Wall Street

    Stocks tick higher after another dizzying day on Wall Street

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    NEW YORK (AP) — Stocks rose Thursday, but only after another dizzying day for Wall Street where a big show of strength from the morning vanished and worries rose about the banking industry.

    The S&P 500 added 0.3% for its third gain in four days, but it had been on track for a much healthier gain of 1.8% in the morning. The Dow Jones Industrial Average saw an early gain of 481 points disappear, and it likewise dipped to a brief loss before closing with a rise of 75 points, or 0.2%. Strength for technology stocks helped the Nasdaq composite hold up better than the rest of the market, and it added 1%.

    Two big questions have been causing big swings for Wall Street this month, and investors still don’t have a final answer for either. On one, investors are worried about whether more banks will suffer a debilitating exodus of customers following the second- and third-largest U.S. bank failures in history. On the other, all the turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after hiking them to market-rattling heights over the last year.

    “Until these two clouds get resolved, it’s hard to see the market making any sustained headway,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

    “I do think it’s something where it could calm down on its own,” Ma said about the crisis pounding the banking industry, “and I hope that it does. But it’s not clear why that would happen” without more forceful action from the government.

    A day earlier, stocks fell sharply after the Federal Reserve indicated that while the end may be near for its hikes to interest rates, it still doesn’t expect to cut rates this year. Fed Chair Jerome Powell also insisted the Fed could keep raising rates if inflation stays high.

    Traders on Thursday nevertheless were still largely betting the Fed will cut rates later this year. Such cuts can act like steroids for markets, juicing prices for stocks, bonds and other investments. They would relax the pressure on the banking industry and economy, but they could also give inflation more fuel.

    Big technology and other high-growth stocks that tend to benefit the most from lower rates were among the strongest on Wall Street. Nvidia rose 2.7%, and Microsoft gained 2%.

    Markets were also still mulling comments from Treasury Secretary Janet Yellen that may have helped drag down bank stocks on Tuesday.

    She said the government is not considering blanket protections for all customers at all banks. That may have disappointed some investors hoping for a more comprehensive solution. But Yellen did say the government will make all depositors whole at banks on a case-by-case basis, when failing to do so would mean risk for the broader system.

    Implicit in that is perhaps the hint that any bank failure could be seen as such a systemic risk. Failures at both Silicon Valley Bank and Signature Bank met that criteria. Depositors were promised all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.

    Still, investors likely need to hear something more concrete to be sure, said Ma.

    “The reality is that until there’s a belief that, at least in the near term, all deposits are protected, the economy remains at much greater risk than it needs to be,” he said

    “If someone has deposits at” a bank seen as weak “and the stock is going down, why not pull your deposits, because we don’t know if those deposits will be guaranteed by the FDIC,” he said. “If any other prominent midsized banks go under and the deposits are not guaranteed, then all hell breaks loose.”

    Stocks in the financial industry ended up being the heaviest weight on the S&P 500 despite rising in the morning. First Republic Bank, which has been at the center of investors’ crosshairs the last couple weeks, fell 6% after giving up a gain of nearly 10%.

    The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.

    The Fed’s Powell said such fears were part of the reason the central bank raised rates by only a quarter of a percentage point Wednesday instead of more. A pullback in lending could act almost like a rate hike on its own, he said.

    In markets abroad, stocks in London fell 0.9% after the Bank of England also raised its key rate by a quarter of a percentage point. Stocks were mixed elsewhere across Europe and Asia.

    On Wall Street, shares of Coinbase Global fell 14.1% after the cryptocurrency trading platform said it had been warned by the Securities and Exchange Commission that it could face charges of violating U.S. securities laws.

    All told, the S&P 500 rose 11.75 points to 3,948.72. The Dow gained 75.14 to 32,105.25, and the Nasdaq climbed 117.44 to 11,787.40.

    In the U.S. bond market, which has been home to some of Wall Street’s wildest moves this month, yields fell.

    The yield on the two-year Treasury dropped to 3.81% from 3.97% late Wednesday. It was above 5% earlier this month.

    ___

    AP Business Writers Yuri Kageyama and Mat Ott contributed.

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  • Asian stocks sink after Credit Suisse takeover

    Asian stocks sink after Credit Suisse takeover

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    BEIJING — Asian stock markets fell Monday after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.

    Hong Kong, Tokyo and Sydney declined. Shanghai edged up. Oil prices retreated.

    Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders including a facility to borrow U.S. dollars if necessary.

    Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. That caused prices of bonds and other assets on their books to fall, fueling unease about the industry’s financial health.

    “Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” Stephen Innes of SPI Asset Management said in a report.

    The Hang Seng in Hong Kong lost 2.5% to 19,023.69 and the Nikkei 225 in Tokyo shed 1.1% to 27,030.90. The Shanghai Composite Index gained 0.1% to 3,254.81.

    The Kospi in Seoul retreated 0.4% to 2,387.06 and Sydney’s S&P-ASX 200 lost 1.2% to 6,913.80. New Zealand and Southeast Asian markets also declined.

    The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.

    U.S. regulators have also sought to calm fears over threats to banking systems. The Federal Reserve said cash-short banks had borrowed about $300 billion from the Federal Reserve in the week up to Thursday.

    Separately, New York Community Bank agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

    That fueled concern about other lenders with shaky finances. Credit Suisse is among 30 institutions known as globally systemically important banks. Ahead of its takeover, Wall Street’s benchmark S&P 500 index lost 1.1% on Friday to 3,916.64.

    Shares of First Republic Bank sank nearly 33% to bring their plunge for the week to 71.8%.

    The Dow Jones Industrial Average lost 1.2% to 31,861.98. The Nasdaq composite fell 0.7% to 11,630.51.

    The unexpectedly large, fast rate hikes by the Fed and other central banks to cool inflation that is close to multi-decade highs have caused prices of bonds and other assets on their books to fall.

    Traders expect last week’s turmoil to push the Fed to limit a rate hike at its meeting this week to 0.25 percentage points. That would be the same as the previous increase and half the margin traders expected earlier.

    A survey released Friday by the University of Michigan showed inflation expectations among American consumers are falling. That matters to the Fed, which has said such expectations can feed into virtuous and vicious cycles.

    In energy markets, benchmark U.S. crude sank 41 cents to $66.33 in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74.

    Brent crude, the price basis for international oils, declined 44 cents to $72.53 per barrel in London. It retreated $1.73 the previous session to $72.97.

    The dollar gained to 132.03 yen from Friday’s 131.67 yen. The euro declined to $1.0667 from $1.0681.

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  • Asian stocks sink after Credit Suisse takeover

    Asian stocks sink after Credit Suisse takeover

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    BEIJING — Asian stock markets fell Monday after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.

    Hong Kong, Tokyo and Sydney declined. Shanghai edged up. Oil prices retreated.

    Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders including a facility to borrow U.S. dollars if necessary.

    Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. That caused prices of bonds and other assets on their books to fall, fueling unease about the industry’s financial health.

    “Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” Stephen Innes of SPI Asset Management said in a report.

    The Hang Seng in Hong Kong lost 2.5% to 19,023.69 and the Nikkei 225 in Tokyo shed 1.1% to 27,030.90. The Shanghai Composite Index gained 0.1% to 3,254.81.

    The Kospi in Seoul retreated 0.4% to 2,387.06 and Sydney’s S&P-ASX 200 lost 1.2% to 6,913.80. New Zealand and Southeast Asian markets also declined.

    The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.

    U.S. regulators have also sought to calm fears over threats to banking systems. The Federal Reserve said cash-short banks had borrowed about $300 billion from the Federal Reserve in the week up to Thursday.

    Separately, New York Community Bank agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

    That fueled concern about other lenders with shaky finances. Credit Suisse is among 30 institutions known as globally systemically important banks. Ahead of its takeover, Wall Street’s benchmark S&P 500 index lost 1.1% on Friday to 3,916.64.

    Shares of First Republic Bank sank nearly 33% to bring their plunge for the week to 71.8%.

    The Dow Jones Industrial Average lost 1.2% to 31,861.98. The Nasdaq composite fell 0.7% to 11,630.51.

    The unexpectedly large, fast rate hikes by the Fed and other central banks to cool inflation that is close to multi-decade highs have caused prices of bonds and other assets on their books to fall.

    Traders expect last week’s turmoil to push the Fed to limit a rate hike at its meeting this week to 0.25 percentage points. That would be the same as the previous increase and half the margin traders expected earlier.

    A survey released Friday by the University of Michigan showed inflation expectations among American consumers are falling. That matters to the Fed, which has said such expectations can feed into virtuous and vicious cycles.

    In energy markets, benchmark U.S. crude sank 41 cents to $66.33 in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74.

    Brent crude, the price basis for international oils, declined 44 cents to $72.53 per barrel in London. It retreated $1.73 the previous session to $72.97.

    The dollar gained to 132.03 yen from Friday’s 131.67 yen. The euro declined to $1.0667 from $1.0681.

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  • After last year’s stunning failure, bonds show up for safety

    After last year’s stunning failure, bonds show up for safety

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    NEW YORK (AP) — Suddenly, bonds are again living up to their reputation as the safe part of an investor’s portfolio.

    As stocks sank worldwide over the last week on worries about the banking system following the second- and third-largest U.S. bank failures in history, bonds shot up in price. That offered some protection to any investor with a mixed set of stocks and bonds in their portfolio, as most advisers suggest.

    Through the middle of March, the largest U.S. bond fund, Vanguard’s Total Bond Market Index fund, returned 2% while the largest U.S. stock fund lost 2.7%. That may not sound like a big deal, but it’s a marked return to form for bonds.

    Last year, they were anything but the safe part of a saver’s nest egg. Their prices plunged on fears about the highest inflation in generations and what the Federal Reserve was doing about it.

    Inflation by itself makes bonds less attractive because it means the fixed payments they make will buy less stuff in the future as prices rise.

    But the barrage of hikes to interest rates instituted by the Fed in hopes of getting inflation under control also inflicted pain. The Fed has vaulted its key overnight rate to a range of 4.50% to 4.75%, up from virtually zero at the start of last year. That helped pull yields higher across the bond market.

    When that happens, newly issued bonds making higher interest payments suddenly look much more attractive than the older bonds already sitting in investors’ portfolios. That makes prices in the market for those older bonds drop. And bond funds have to record such changes in price.

    What made things worse for investors was that bond prices fell last year at the same time stocks did. The hope in having a diversified set of investments is that some will rise when others fall, keeping the overall portfolio safer. That didn’t happen last year.

    This month, though, bonds rallied as worries spread about the banking system following the collapse of Silicon Valley Bank. That helped to buffer anyone who was also invested in stocks or commodities.

    “These are the safe haven assets that are actually acting like safe havens,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial. “You couldn’t say that last year.”

    Of course, the rally means that bonds are carrying lower yields than just a week ago. That means they’ll pay a little bit less in income than before and have a little smaller cushion for future price drops.

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  • Stocks slip as worries worsen about banks, still up for week

    Stocks slip as worries worsen about banks, still up for week

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    NEW YORK — Stocks are slipping on Wall Street Friday as worries worsen about the banking industry and a week of turmoil nears its close.

    The S&P 500 was 0.4% lower in early trading, cutting into its gain for the week. The Dow Jones Industrial Average was down 229 points, or 0.7%, at 32,017, as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.2% lower.

    This week has been a whipsaw for markets around the world as worries rise about the banking industry following the second- and third-largest U.S. bank failures in history. Just a day earlier, markets rallied in relief after two banks on both sides of the Atlantic tapped into tens of billions of dollars of cash to bolster their finances.

    But on Friday, some of the hope was washing out, and the pair were back to falling. In Switzerland, Credit Suisse shares dropped 8.5%. On Wall Street, shares of First Republic Bank sank nearly 20% and were on their way to a 66% plunge for the week.

    The two banks have different sets of issues challenging them, but the overriding fear is that the banking system may be cracking under the weight of the fastest set of hikes to interest rates in decades.

    Analysts have been quick to say the current chaos for banks looks nowhere near as bad as the 2007-08 financial crisis that ruined the global economy. But the troubles still feed into concerns about a recession because problems for banks could mean problems for smaller and mid-sized companies getting the loans they need to grow.

    In “the biggest picture: since 1870 there have been 14 big world recessions, all driven by wars, pandemics & banking crises,” investment strategist Michael Hartnett wrote in a BofA Global Research report.

    Banks have borrowed nearly $165 billion from the Federal Reserve over the last week in a sign of how much stress is in the system.

    After years of enjoying historically easy conditions, banks and the economy are now getting a shock to the system after the Federal Reserve and other central banks have jacked up interest rates at a blistering pace. The moves are meant to get the world’s high inflation under control.

    Higher rates can indeed help tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank, which collapsed Friday. High races had undercut the value of its bond investments.

    Since then, Wall Street has tried to root out banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    That’s why Wall Street has been so keyed in on San Francisco-based First Republic. A group of 11 of the biggest banks on Thursday said they would deposit a combined $30 billion in the bank to show their confidence in it and banks in general.

    “The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right,” Stephen Innes of SPI Asset Management said in a report.

    Some of the wildest action has been in the bond market, where yields have swung as traders drastically recalibrate bets for where the Fed will take rates.

    The yield on the two-year Treasury, which tends to closely track expectations for the Fed, fell to 4.01% from 4.17% late Thursday. It was above 5% last week and at its highest level since 2007. That’s a massive move for the bond market.

    Traders largely expect this week’s turmoil to push the Federal Reserve to hike interest rates at its next meeting by only a quarter of a percentage point. That would be the same sized increase as last month’s and half the hike of 0.50 points that was expected earlier.

    Such easing expectations have helped several Big Tech stocks to lead the market this week. They’ve had their own problems, but they tend to benefit from lower interest rates. Partly because of that, the S&P 500 is still on track for its best weekly gain since January. It’s up 2.1%.

    Cryptocurrencies have shot even higher this week. Bitcoin is up more than 30%.

    The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    ___

    AP Business Writers Elaine Kurtenbach and Matt Ott contributed.

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  • Asian shares up after First Republic aid spurs Wall St rally

    Asian shares up after First Republic aid spurs Wall St rally

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    BANGKOK — Shares advanced Friday in Asia, tracking a rally on Wall Street after a group of big banks offered a lifeline to First Republic Bank, the lender investors had focused on in their latest hunt for troubles in the banking industry.

    Benchmarks rose more than 1% in Hong Kong, Taiwan and Tokyo. U.S. futures were mixed and oil prices climbed.

    The S&P 500 jumped 1.8% Thursday, erasing earlier losses following reports that First Republic Bank could get help or sell itself to another bank. Markets have gyrated this week on concerns over the toll on banks from the fastest set of interest rate hikes in decades. The turmoil flared with last week’s collapse of Silicon Valley Bank, the second largest bank failure in U.S. history.

    “The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right,” Stephen Innes of SPI Asset Management said in a report.

    In Asia, Hong Kong’s Hang Seng jumped 1.1% to 19,422.81 and the Shanghai Composite index added 0.8% to 3,249.23.

    Tokyo’s Nikkei 225 index gained 1.2% to 27,333.79 and the Kospi in Seoul was up 0.7% at 2,394.27. Shares in major Japanese banks, which fell sharply at times this week, were mostly slightly higher.

    Australia’s S&P/ASX 200 added 0.4% to 6,994.80. India’s Sensex was 0.1% higher while Taiwan’s Taiex surged 1.5%.

    Stocks rallied Thursday on Wall Street after 11 of the biggest banks offered help for First Republic with a combined deposit of $30 billion.

    All told, the S&P 500 rose 68.35 points to 3,960.28. The Dow gained 1.2% to 32,246.55 and the Nasdaq jumped 2.5% to 11,717.28.

    Since SVB’s failure, investors have been on the lookout for banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    First Republic Bank rose 10% Thursday after slumping as much as 36% early in the day.

    The Federal Reserve’s fastest barrage of hikes to interest rates in decades, to drive down inflation, has shocked the banking system following years of historically easy conditions.

    Higher rates raise the risk of a recession later on and hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank because high rates forced down the value of its bond investments.

    U.S. Treasury Secretary Janet Yellen told a Senate committee on Thursday that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.

    Wall Street increasingly expects this week’s turmoil to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point. That would be the same sized increase as last month’s, half the hike of 0.50 points that was earlier expected.

    The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    All the stress in the banking system has raised worries about a potential recession because of how important smaller and mid-sized banks are to making loans to businesses across the country. Oil prices have slid this week on such fears.

    Reports on the U.S. economy are showing mixed signals. A report said fewer workers applied for unemployment benefits last week than expected.

    In other trading, U.S. benchmark crude oil gained 44 cents to $68.79 a barrel in electronic trading on the New York Mercantile Exchange. It picked up 74 cents on Thursday to $68.35 a barrel.

    Brent crude, the pricing basis for international trading, climbed 46 cents to $75.16 a barrel.

    The dollar fell to 132.93 Japanese yen from 133.76 yen. The euro rose to $1.0648 from $1.0611.

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  • Stocks flip to gains on Wall Street, Treasury yields swing

    Stocks flip to gains on Wall Street, Treasury yields swing

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    NEW YORK — Stocks flipped to gains Thursday amid hopes for help for a bank at the center of Wall Street’s hunt for what’s next to crack in the struggling industry.

    The S&P 500 was 0.8% higher in midday trading after erasing an earlier loss of nearly that much following reports that First Republic Bank could receive financial assistance or sell itself to another bank.

    The Dow Jones Industrial Average was up 103 points, or 0.3%, at 31,978, as of 11:20 a.m. Eastern time, while the Nasdaq composite was 1.3% higher.

    This week has been a whirlwind for markets globally on worries about banks that may be bending under the weight of the fastest set of hikes to interest rates in decades. The crisis of confidence has been flaring since Friday’s collapse of Silicon Valley Bank, which was the second largest bank failure in U.S. history.

    Since then, Wall Street has tried to root out banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    First Republic Bank has been at the center of the market’s swivels, and it fell 28.3%. It’s down nearly 73% this week alone.

    But big banks including JPMorgan Chase and Morgan Stanley are discussing a potential deal that could mean a big infusion of cash for the bank, according to a report from The Wall Street Journal.

    Financial stocks across the S&P 500 flipped from losses in the morning to gains by midday. Treasury yields also strengthened suddenly, a sign of increased confidence from the bond market.

    Across the Atlantic, European stocks rose after the European Central Bank announced a hefty increase to interest rates. They were also stabilizing after dropping sharply Wednesday on worries about Credit Suisse. The Swiss bank has been battling troubles for years, but its plunge to a record low raised concerns just as more attention shines on the wider industry.

    Credit Suisse’s stock in Switzerland leaped 17.8% Thursday after it said it will strengthen its finances by borrowing up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

    Treasury Secretary Janet Yellen told the Senate Finance Committee on Thursday that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.

    Much of the damage for banks is seen as the result of the Federal Reserve’s fastest barrage of hikes to interest rates in decades. They’ve shocked the system following years of historically easy conditions in hopes of driving down painfully high inflation.

    Higher rates can tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank because high rates forced down the value of its bond investments.

    Wall Street increasingly expects banks’ struggles to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point. That would be the same sized increase as last month’s, and it would be counter to expectations from earlier this month that it could hike by 0.50 points as it had been potentially signaling.

    Some traders are also betting on the possibility the Fed could take a pause on rate hikes next week. just

    The European Central Bank on Thursday raised its key interest rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    Some of Wall Street’s wildest action this week has been in the bond market, as traders rush to guess where the Fed is heading.

    The yield on the 10-year Treasury fell to 3.44% from 3.47% late Wednesday. It was above 4% earlier this month, and it helps set rates for mortgages and other important loans.

    All the stress in the banking system is raising worries about a potential recession because of how important smaller and mid-sized banks are to making loans to businesses across the country. Oil prices have slid this week on such fears.

    Economists at Goldman Sachs said all the near-term uncertainty surrounding small banks mean they see a 35% probability of a recession in the next 12 months. That’s up from their prior forecast of 25%.

    Reports on the U.S. economy, meanwhile, continue to show mixed signals.

    The job market looks remarkably solid, and a report said fewer workers applied for unemployment benefits last week than expected. .

    But other pockets of the economy are continuing to show weakness. Manufacturing has struggled, for example, and a measure of activity in the mid-Atlantic region weakened by more than expected.

    The housing market has also been struggling under the weight of higher mortgage rates, though homebuilders broke ground on more projects last month than expected. That could be a signal the industry is finding some stability.

    ___

    AP Business Writers Joe McDonald and Matt Ott contributed.

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  • Asian shares extend losses as US banking worries persist

    Asian shares extend losses as US banking worries persist

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    TOKYO — Asian shares declined Tuesday, with heavy selling of banks shares in Tokyo and some other markets, as investors around the world watched to see what’s next following the second- and third-largest bank failures in U.S. history.

    Direct exposure to the risks from the U.S. failures in Asia seemed slim, at least so far. Still, fears of contagion persisted, sending regional benchmarks lower across the region.

    Japan’s benchmark Nikkei 225 dropped 2.2% to finish at 27,222.04, extending losses from the day before.

    Bank shares plunged. MUFG fell 8.6%, Mizuho Financial Group sank 7.1% and Sumitomo Mitsui Financial Group’s shares dropped 9.8%. Tech sector companies also were sold, with SoftBank shares losing 4.1% and Sony Group down 2.8%.

    Banks in South Korea and Australia also declined.

    Australia’s S&P/ASX 200 dipped 1.4% to 7,008.90. South Korea’s Kospi fell 2.6% to 2,349.19. Hong Kong’s Hang Seng fell 2.4% to 19,233.51. The Shanghai Composite declined 0.6% to 3,247.81.

    “There is escalating tension in the global financial world; this is despite non-U.S. banks’ exposure to US regional banks being minimal, with the global systems being well capitalized and flush with liquidity,” Stephen Innes, managing partner at SPI Asset Management, said in a report.

    “U.S. financial stress could lead banks of all stripes to retrench lending to the real economy and tighten broader financial conditions, amplifying risk to the broader markets.”

    On Monday, Japan’s chief government spokesman, Hirokazu Matsuno, told reporters that the impact on Japanese banks would likely be limited. Finance Minister Shunichi Suzuki, echoed similar sentiments Tuesday, stressing that Japan’s fiscal system remained stable, stressing the “low likelihood” of any negative effects.

    The biggest price declines so far on Wall Street have also been with banks. On Monday, other stocks rose on hopes the bloodletting will force the U.S. Federal Reserve to take it easier on the hikes to interest rates that are shaking Wall Street and the economy.

    Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system.

    On Wall Street, the S&P 500 dipped 0.2% to 3,855.76 after whipsaw trading, where it careened from an early loss of 1.4% to a midday gain of nearly that much. The Dow Jones Industrial Average fell 0.3% to 31,819.14, while the Nasdaq composite rose 0.4% to 11,188.84.

    The U.S. government announced a plan late Sunday meant to shore up confidence in the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday.

    The heaviest pressure is on the regional banks a couple steps below in size of the massive, “too-big-to-fail” banks that foundered in 2007 and 2008. Shares of First Republic Bank fell 61.8%, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.

    Huge banks, which have been repeatedly stress-tested by regulators following the 2008 financial crisis, weren’t down as much. JPMorgan Chase fell 1.8%, and Bank of America dropped 5.8%.

    Some investors are calling for the Fed to make cuts to interest rates soon to stanch the bleeding. Rate cuts often act like steroids for the stock market. The wider expectation, though, is that the Fed will likely pause or at least hold off on accelerating its rate hikes at its next meeting later this month.

    That would still be a sharp turnaround from expectations just a week ago, when many traders were forecasting the Fed could go back to increasing the size of its rate hikes to tame stubbornly high inflation.

    Higher interest rates can drag down inflation by slowing the economy, but they raise the risk of a recession later on. They also hit prices for stocks, as well as bonds sitting in investors’ portfolios.

    Prices for Treasurys shot higher as investors sought safety and as their expectations grew for an easier Fed. That in turn sent their yields lower, The yield on the 10-year Treasury was steady at 3.56%, down from 3.70% late Friday. That’s a major move for the bond market.

    The two-year yield, which moves more on expectations for the Fed, fell to 3.99% from 4.59% Friday. It was above 5% earlier this month.

    In energy trading, benchmark U.S. crude lost 91 cents to $73.89 a barrel in electronic trading on the New York Mercantile Exchange. It fell $1.88 to $74.80 a barrel on Monday.

    Brent crude, the international standard, lost 89 cents to $79.88 a barrel.

    In currency trading, the U.S. dollar rose to 133.51 Japanese yen from 133.20 yen. The euro cost $1.0697, down from $1.0734.

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  • Bank stocks plunge and S&P 500 swings as Wall Street shakes

    Bank stocks plunge and S&P 500 swings as Wall Street shakes

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    NEW YORK — Wall Street is worried about what may be next to topple following the second- and third-largest bank failures in U.S. history, and stocks are swinging sharply Monday as investors scramble to find someplace safe to park their money.

    The S&P 500 was virtually unchanged in morning trading, but only after tumbling 1.4% at the open. The sharpest drops were again coming from banks. Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system and broader economy.

    The U.S. government announced a plan late Sunday meant to shore up the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday.

    The most pressure is on the regional banks one or two steps below in size of the massive, “too-big-to-fail” banks that helped take down the economy in 2007 and 2008. Shares of First Republic plunged 66.3%, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.

    “So far, it seems that the potential problem banks are few, and importantly do not extend to the so-called systemically important banks,” analysts at ING said.

    The broader market was holding up better as expectations built that the all the chaos means the Fed would have to take it easier on its economy-rattling hikes to interest rates. The Dow Jones Industrial Average was up 94 points, or 0.3%, at 32,004 as of 10 a.m. Eastern time, while the Nasdaq composite was 0.1% higher. Both erased sharp earlier losses.

    Stock markets were mixed in Asia after the U.S. government announced its plan to protect depositors at banks, but the losses deepened as trading headed westward through Europe. Germany’s DAX lost 3.3% as bank stocks across the continent sank. On Wall Street, a measure of fear among stock investors touched its highest level since October.

    Among the few investments to climb in price was gold, as investors looked for anything that seemed safe. It rose 2.3% to $1,910.50 per ounce.

    Prices for Treasurys also shot higher on both demand for something safe and expectations for an easier Fed. That in turn sent their yields lower, and the yield on the 10-year Treasury plunged to 3.51% from 3.70% late Friday. That’s a major move for the bond market. It was above 4% earlier this month.

    The two-year yield, which moves more on expectations for the Fed, had an even more breath-taking drop. It fell to 4.12% from 4.59% Friday.

    Some investors are calling for the Fed to make emergency cuts to interest rates soon to stanch the bleeding. The wider expectation, though, is that the Fed will likely pause or slow its increases.

    Traders are betting on a nearly four-in-five chance that the Fed will hike its key overnight interest rate by 0.25 percentage points later this month at its next meeting. They’re also now betting on a 21% chance that it will hold steady, according to CME Group.

    That’s a sharp turnaround from earlier last week, when many traders were betting on the Fed reaccelerating its hikes and increasing by 0.50 percentage points because of how stubbornly sticky high inflation has been.

    “At this point in time, depending on reactions in financial markets and eventual fallout on the overall economy, we wouldn’t rule out that the hiking cycle could even be over and that the next move by Fed officials may be lower not higher,” said Kevin Cummins, chief U.S. economist at NatWest.

    Higher interest rates can drag down inflation by slowing the economy, but they raise the risk of a recession later on. They also hit prices for stocks, as well as bonds already sitting in investors’ portfolios.

    That latter effect is one of the reasons for the worries about the banking system. The Fed began hiking interest rates almost exactly a year ago, and it’s instituted the sharpest flurry in decades. Its key overnight rate is now at a range of 4.50% to 4.75%, up from virtually zero.

    That has hurt the investment portfolios of banks, which often park their cash in Treasurys because they’re considered among the safest investments on Earth.

    The collapse of Silicon Valley Bank has reverberated around the world.

    In London, the government arranged the sale of Silicon Valley Bank UK Ltd., the California bank’s British arm, for the nominal sum of one British pound, or roughly $1.20.

    While the bank is small, with less than 0.2% of U.K. bank deposits according to central bank statistics, it had a large role in financing technology and biotech startups that the British government is counting on to fuel economic growth.

    Germany’s financial regulator, BaFin, on Monday prohibited asset disposals and payments by Silicon Valley Bank’s German branch and imposed a moratorium, effectively shutting it for dealings with customers.

    Before trading began in Asia, the U.S. Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said Sunday that all Silicon Valley Bank clients will be protected and have access to their funds and announced steps designed to protect the bank’s customers and prevent more bank runs.

    Regulators on Friday closed Silicon Valley Bank as investors withdrew billions of dollars from the bank in a matter of hours, marking the second-largest U.S. bank failure behind the 2008 failure of Washington Mutual. They also announced Sunday that New York-based Signature Bank was being seized after it became the third-largest bank to fail in U.S. history.

    ___

    AP Business Writers David McHugh, Yuri Kageyama and Matt Ott contributed.

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  • Asian stocks mixed after Wall St steadies amid rate fears

    Asian stocks mixed after Wall St steadies amid rate fears

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    BEIJING — Asian stock markets were mixed Thursday after Wall Street steadied following a plunge on worries about more U.S. interest rate hikes.

    Shanghai and Seoul declined. Tokyo and Hong Kong advanced. Oil prices edged lower.

    Wall Street’s benchmark S&P 500 index recovered some of the previous day’s loss following Federal Reserve chair Jerome Powell’s warning that rate hikes might speed up because upward pressure on prices is stronger than expected.

    Investors worry the Fed and other central banks look increasingly likely to tip the global economy into at least a brief recession to extinguish stubborn inflation. U.S. inflation edged up in January to 5.4%, well above the Fed’s target of 2%.

    “The risks of a higher and faster hike trajectory have risen,” Stephen Innes of SPI Asset Management said in a report. He said the Fed might be motivated by “mounting criticism” that it has “fallen behind the inflation curve.”

    The Shanghai Composite Index lost 0.2% to 3,277.13 after Chinese inflation decelerated in February to 1% over a year earlier from the previous month’s 2.5%. The Hang Seng in Hong Kong advanced 0.3% to 20,110.28.

    The Nikkei 225 in Tokyo gained 0.6% to 28,616.03 after the government cut its estimate of economic growth in the three months ending in December to 0.1% from a previous estimate of 0.6%.

    The Kospi sank 0.4% to 2,422.31 and Sydney’s S&P-ASX 200 was up less than 0.1% at 7,311.10.

    India’s Sensex opened down 0.2% at 60,197.90. New Zealand and Singapore declined while Jakarta and Bangkok rose.

    On Wall Street, the S&P 500 rose 0.1% on Wednesday to 3,992.01.

    The Dow Jones Industrial Average fell 58.06, or 0.2%, to 32,798.40, while the Nasdaq composite added 45.67, or 0.4%, to 11,576.00.

    Powell said Fed policymakers want to see more data before deciding on future rate hikes.

    A report Wednesday showed the number of job openings advertised across the country last month was higher than expected. Traders scrutinize such data for clues about wages, one factor the Fed looks at in trying to forecast inflation.

    The report also showed some signs of easing pressure, including fewer Americans quitting their jobs.

    A separate report Wednesday suggested hiring is still stronger across U.S. private employers than expected.

    The U.S. government’s more comprehensive monthly report on hiring is due out Friday.

    Other data showed strong U.S. consumer spending, another factor policymakers worry might push up prices.

    Expectations for a firmer Fed have been most clear in the bond market, where yields have shot higher.

    The yield on the 10-year Treasury, or the difference between its market price and the payout at maturity, ticked up to 3.98% from 3.97% late Tuesday.

    The yield on the two-year Treasury rose to 5.05% from 5.02%. It’s near its highest level since 2007.

    Yields on shorter-term Treasurys are above those for Treasurys that pay off further in the future. Wall Street sees that as a fairly reliable indicator of an impending recession.

    In energy markets, benchmark U.S. crude gained 4 cents to $76.70 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 92 cents on Wednesday to $76.66. Brent crude, the price basis for international oil trading, added 4 cents to $82.70 per barrel in London. It retreated 63 cents the previous session to $82.66.

    The dollar declined to 136.81 yen from Wednesday’s 137.24 yen. The euro gained to $1.0554 from $1.0545.

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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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  • 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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  • 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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  • 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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  • 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.

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    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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  • 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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  • Asian shares decline following Wall Street tumble

    Asian shares decline following Wall Street tumble

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    TOKYO — Asian shares declined Wednesday after stocks tumbled on Wall Street as worries persist about higher interest rates and their tightening squeeze on the global economy.

    Tokyo’s benchmark Nikkei 225 dipped 1.4% in afternoon trading to 27,102.21. Australia’s S&P/ASX 200 slipped 0.3% to 7,314.50. South Korea’s Kospi dropped 1.6% to 2,419.15. Hong Kong’s Hang Seng slipped 0.3% to 20,461.32, while the Shanghai Composite shed 0.6% to 3,287.64.

    New Zealand’s central bank raised its benchmark interest rate by a half-point to 4.75% to try to wrestle down inflation. The increase, which can raise the borrowing costs for consumers on everything from credit cards to mortgages, comes despite widespread economic pain from a devastating cyclone.

    Higher rates hurt investment prices and raise the risk of a recession by slowing business investment and consumer spending.

    U.S. employment and consumer spending have weathered higher interest rates well, but a report Tuesday showed sales of previously occupied homes slowed to their slowest pace in more than a decade. The mixed signals leave investors wondering if the Fed will ease back on rate hikes or resume a more aggressive stance.

    “Amid the evolving new narrative of stronger US growth, payrolls, retail sales, and the additional Fed response required to tame the rude health of the US economy, investors are beginning to think the hawkish Fed may not have entirely run its course yet,” Stephen Innes of SPI Asset Management said in a commentary.

    The S&P 500 fell 2% to 3,997.34 on Tuesday for its sharpest drop since the market was selling off in December. The Dow Jones Industrial Average lost 697 points, or 2.1%, to 33,129.59 while the Nasdaq composite sank 2.5% to 11,492.30.

    Home Depot fell to one of the market’s larger losses after giving financial forecasts that fell short of Wall Street’s expectations. It dropped 7.1% despite reporting stronger profit for the last three months of 2022 than expected.

    The retailer said it would spend $1 billion to increase wages for hourly U.S. and Canadian workers. That fed into broader worries for markets that rising costs for companies have been eating into profits, which are one of the main levers that set stock prices.

    Rates and stock prices are high enough that strategists at Morgan Stanley say U.S. stocks look to be more expensive than at any time since 2007.

    The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, leaped further to 3.95% from 3.82% late Friday. The two-year yield, which moves more on expectations for the Fed, rose to 4.72% from 4.62%. It’s close to its highest level since 2007.

    Yields have shot higher this month as Wall Street ups its forecasts for how high the Federal Reserve will take short-term interest rates in its efforts to stamp out inflation. The Fed has already pulled its key overnight rate up to a range of 4.50% to 4.75%, up from basically zero at the start of last year.

    The worry is that the Fed could ratchet up its forecasts for rates further next month when it releases its latest projections for the economy. Besides showing more strength in the job market and retail sales than expected, recent reports have also suggested inflation is not cooling as quickly and as smoothly as hoped. Investors are also pushing back their forecasts for when the first cut to rates could happen.

    Those worries have caused the strong rally by Wall Street early in the year to stall. Having risen as much as 8.9%, the S&P 500 is now clinging to a gain of 4.1% for the year so far.

    In other trading Wednesday, benchmark U.S. crude lost 35 cents to $76.01 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, fell 37 cents to $82.68 a barrel.

    The U.S. dollar fell to 134.85 Japanese yen from 134.92 yen. The euro rose to $1.0659 from $1.0653.

    ___

    Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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