Stock market today: Asian stocks are trading mixed after Wall Street slumped on fading interest rate cut hopes

TOKYO (`) — Asian stocks traded mixed Thursday as pessimism spread among investors about an impending interest rate cut in the United States.

Japan's benchmark Nikkei rose 0.5% to 35,637.01 in morning trade. Australia's S&P/ASX 200 slipped 0.5% to 7,357.40. South Korea's Kospi rose 0.6% to 2,450.00. Hong Kong's Hang Seng fell nearly 0.2% to 15,251.64, while the Shanghai Composite fell 2.3% to 2,768.90.

Wall Street slipped after another signal that it may have become too optimistic about when the Federal Reserve will cut interest rates.

The S&P 500 fell 26.77 points, or 0.6%, to 4,739.21. It's the second straight stumble for the index after it ended its 10th week of gains in the last 11 weeks near its all-time high.

The Dow Jones Industrial Average fell 94.45, or 0.3%, to 37,266.67, and the Nasdaq Composite fell 88.73, or 0.6%, to 14,855.62.

Rising bond market yields are putting renewed downward pressure on stocks. Yields rose after a report showed this Sales at US retailers were stronger in December than economists expected.

While that's good news for an economy that has defied recession predictions, it could also keep upward pressure on inflation. That, in turn, could prompt the Federal Reserve to wait longer than traders expect to cut interest rates after raising them sharply over the past two years. Lower interest rates would reduce pressure on the economy and the financial system while increasing the price of investments.

The yield on the 10-year Treasury note jumped immediately after the retail sales report, climbing to 4.10% from 4.06% on Wednesday. Higher yields can reduce companies' profits while reducing investors' willingness to pay high prices for stocks.

Higher returns affect all types of investments, and high-growth stocks tend to be hit the hardest. Declines of 2% for Tesla and 0.9% for Amazon were among the largest weightings in the S&P 500. Smaller companies in the Russell 2000 index also fell as much as 1.5% before paring their loss to 0.7%. reduced.

The yield on two-year Treasury bonds, which is more in line with the Fed's expectations, also jumped. It rose to 4.34% from 4.22% on Wednesday as traders cut expectations for the Fed's first interest rate cut in March. Traders now expect the probability to be less than 60%, down from about 70% last month, according to data from CME Group.

A senior Fed official, Governor Christopher Wallersaid on Tuesday that given the economy's resilience, the central bank could take its time before making its next interest rate moves.

“These comments leave a rate cut on the table as early as March, but also show that such a move is not yet a done deal,” said Deutsche Bank economists led by Amy Yang.

On Wednesday, the Head of the European Central Bank warned in a speech about the risks of cutting interest rates too early.

Interest rates are one of the most important levers that determine stock prices. The other is corporate earnings, and several companies reported weaker results than analysts expected on Wednesday, including US Bancorp and Big 5 Sporting Goods.

Charles Schwab reported higher profit than analysts expected for its latest quarter, but the stock still fell 1.3%. Sales fell short of estimates and analysts said the better-than-expected profits were likely due in part to lower tax rates.

Spirit Airlines came under heavy pressure again and fell by 22.5%. The company's share price almost halved the previous day after a US judge blocked its purchase by JetBlue Airways over fears it would lead to higher airfares. JetBlue lost 8.7%.

In energy trading, the benchmark price for US crude oil rose 20 cents to $72.76 a barrel. Brent crude, the international standard, was unchanged at $77.88 a barrel.

In foreign exchange trading, the US dollar fell to 148.03 Japanese yen from 148.11 yen. The euro was at $1.0894, up from $1.0886.

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` business reporter Stan Choe contributed from New York. Yuri Kageyama is on X https://twitter.com/yurikageyama.