Tokyo, Jan. 11 (BNA): Asian stocks tumbled in cautious trading Tuesday after a fall on Wall Street amid continuing concerns about the Omicron coronavirus variant, especially the rising cases in China.
Japan’s Nikkei 225 index fell 0.8% in morning trading to 28,242.46. South Korea’s Kospi was little changed at 2,926.01. Australia’s S&P/ASX 200 fell 0.8% to 7,391.50. Hong Kong’s Hang Seng lost 0.5% to 23640.42, while the Shanghai Composite fell less than 0.1% to 3,592.35.
Asian markets also have their eyes on the US Federal Reserve, which is expected to tighten interest rates this year. What is happening in China is also likely to have regional repercussions.
Major companies, including automakers like Toyota, have been counting on recovering supplies of semiconductor chips and other products from China and the rest of Asia, as vaccinations and other coronavirus prevention efforts advance. The recent surge in infections has seriously dashed Omicron with such hopes.
China is still struggling with a spike in COVID-19 cases, with the start of restrictive measures to contain the spread of the virus ahead of the Winter Olympics in February. While it may still be too early to say, the risks we are monitoring could be any disruptions to supply chains exacerbating pricing pressures or a shift in the COVID-free China approach,” according to Yeap Jun Rong, market strategist at IG in Singapore, According to The Association Press (AP).
On Wall Street, a broad sell-off sent the S&P 500 down 2% early on, but the late afternoon buying eruption left the benchmark with a loss of just 0.1%. The Dow Jones Industrial Average was down 0.5% after falling 1.6%, and the tech-heavy Nasdaq gained less than 0.1% after falling 2.7%.
The latest decline came on the heels of last week’s sell-off as investors shifted holdings in anticipation that the Federal Reserve would raise interest rates this year, among other moves aimed at lowering inflation. Wall Street is trying to get a better reading of when and how much the Fed will raise interest rates.
“The market has been shaken a bit by the uncertainty about everything,” said JJ Kinahan, chief strategist at TD Ameritrade. “I expect volatility to continue to rise for the remainder of the first quarter, at least, as we continue to address this question.”
The Standard & Poor’s 500 Index fell 6.74 points to 4,670.29 points. The decline extended the index’s losing streak to five days. It is now about 2.6% below its high a week ago.
The Dow Jones Industrial Average fell 162.79 points to 26,068.87 after having been as low as 591 points earlier. The Nasdaq index rose 6.93 points to 14,942.83 points, ending a four-day losing streak. Small-cap stocks also fell. The Russell 2000 Index fell 8.66 points, or 0.4%, to 2,171.15.
The selling started losing momentum at the same time that the increase in Treasury yields subsided. The 10-year Treasury briefly hit 1.84% before easing back to 1.76% in the late afternoon. That matches where the yield was late on Friday.
Early on, when bond yields were rising, technology stocks were the biggest drag on the S&P 500. Higher interest rates make expensive tech stocks and other expensive growth companies less attractive to investors, which is why the sector has slipped as high-yield bonds. The tech sector was the biggest weight in the market until January and is coming off its worst week since October 2020.
Big tech stocks have a huge impact on the S&P 500 because of their sheer size. Going into the year, the technology sector represented 29.2% of the S&P 500.
Higher interest rates could help control the high inflation sweeping the world, but they would also put an end to the conditions that have put financial markets in “easy mode” for many investors since early 2020. The Fed has said it will speed up reducing its bond purchases, This helped keep interest rates low. The market now places the chances of the Fed raising short-term rates by at least a quarter point in March at around 78%. A month ago it was around 36%.
Industrial stocks, banks and a mix of companies that rely on consumer spending accounted for a large share of the S&P 500’s decline on Monday. These losses were curbed by gains in healthcare, technology and telecom stocks.
A mix of deal news and financial updates moved many of the big stocks.
Take-Two Interactive, maker of “Grand Theft Auto,” fell 13.1% for the biggest drop in the S&P 500 after announcing a deal to buy Zynga, which makes “Words With Friends” and “Farmville.” Zynga jumped 40.7%.
Sportswear maker Lululemon Athletica fell 1.9 percent after investors warned that an increase in virus cases was hurting fourth-quarter financial results. Medical products maker and distributor Cardinal Health fell 5.9% after it said supply chain problems would hurt its medical sector profits.
Investors are enjoying a busy week of economic reports and corporate earnings.
On Wednesday, the Labor Department will release an update on how inflation will affect prices through its December CPI. The agency will release details on how inflation will affect business through its December PPI on Thursday.
On Friday, Citigroup, JPMorgan Chase and Wells Fargo will announce their latest quarterly financial results.
HF