BANGKOK (AP) — Stocks soared in Asia on Tuesday after Wall Street’s benchmark indexes recouped some losses from their worst week since early December.
Stocks came under selling pressure as analysts raised their forecasts to find out how far the Federal Reserve will raise interest rates and how long it will hold them to rein in inflation which has not come down as much as expected given strong job growth and other signs resilience of the economy.
Economies around the world remained more resilient than expected, with China easing its business-damaging anti-COVID restrictions and Europe avoiding the worst-case scenario energy crisis.
“As we enter ‘Turnaround Tuesday,’ investors are wondering if January’s inflation reflation was just another temporary bump in the road as the economy adjusts to a post- pandemic,” Stephen Innes of SPI Asset Management said in a report. “The post-pandemic era continues to offer unusual macroeconomic patterns.”
Tokyo’s Nikkei 225 added 0.2% to 27,487.85 and Seoul’s Kospi rose 0.9% to 2,424.89.
In Hong Kong, the Hang Seng gained 0.4% to 20,030.25 while the Shanghai Composite Index edged up 0.1% to 3,260.40. Australia’s S&P/ASX 200 rose 0.5% to 7,261.20.
Equities struggled in February after a strong start to the year. Strong economic data helps ease recession fears could be imminent given the dampening effect of more expensive borrowing on consumer and business spending.
But they probably mean a longer period of higher interest rates. Heightened rate expectations have been most evident in the bond market, where yields have soared in recent weeks.
Earlier, analysts thought the Fed might backtrack soon. Now, that is expected to drive rates above 5.25%. The Fed’s overnight rate is now in a range of 4.50% to 4.75%, down from virtually zero at the start of last year.
On Monday, the S&P 500 rose 0.3% to 3,982.24 for only its second gain in the past seven days. The Dow Jones Industrial Average gained 0.2% to 32,889.09, while the Nasdaq composite climbed 0.6% to 11,466.98.
Union Pacific Stocks jumped 10.1% in one of the biggest gains in the market after the railroad announced plans to replace its CEO later this year. The company has been under pressure from a hedge fund with a large stake in it.
The 10-year Treasury yield fell to 3.92% from 3.95% on Friday night. This yield helps set the rates for mortgages and other large loans. The two-year yield, which moves more in line with Fed expectations, slipped to 4.79% from 4.81%. It is close to its highest level since 2007.
Yields fell after a report showed orders for machinery, aircraft and other durable manufactured goods fell more than economists expected in January.
Even Monday’s weaker than expected durable goods report had some underlying strength. After ignoring transportation-related equipment, orders surged last month to the biggest gain since March, much bigger than the decline economists expected to see.
Even with concerns about higher-than-expected rates, the S&P 500 holds a 3.7% gain for the year so far, and shoppers continue to spend in stores. Both can add upward pressure on inflation.
Most companies have already released their results for the last three months of 2022. Among the few dozen S&P 500 companies still due to report this week are Advance Auto Parts, Kroger and Target.
Overall, this earnings season has been lackluster. According to FactSet, S&P 500 companies are on track to report their first drop in earnings per share from a year earlier since the summer of 2020.
In other trading on Tuesday, benchmark U.S. crude oil gained 24 cents to $75.91 a barrel in electronic trading on the New York Mercantile Exchange. It lost 64 cents to $75.68 on Monday.
Brent crude, the pricing basis for international trade, rose 17 cents to $82.21 a barrel.
The US dollar fell from 136.20 yen to 136.29 Japanese yen. The euro slipped to $1.0593 from $1.0609.
AP Business Writer Stan Choe contributed.