Asian stocks gain, exchanges are closed in Korea and China for the holidays – San Bernardino Sun
By YURI KAGEYAMA
TOKYO (AP) — Asian stocks gained on Tuesday, reflecting broad overnight gains on Wall Street, as trading in China and most other regional markets were closed for the Lunar New Year holiday.
Japan’s benchmark Nikkei 225 edged up 0.5% in morning trade to 27,139.89. Australia’s S&P/ASX 200 gained 0.4% to 6,996.80.
Wall Street ended a tumultuous January wracked by fears that rising interest rates would make everything in the markets more difficult. Stocks closed higher but still posted their worst monthly loss since the early days of the pandemic.
Investors expect the Federal Reserve to start raising interest rates in March to fight inflation. Ultra-low rates and other stimulus helped markets recover from the initial shock of the coronavirus pandemic and then underpinned stunning gains.
The S&P 500 rallied from an early decline to close 1.9% higher at 4,515.55. Even so, the benchmark fell 5.3% in January, its worst month since plummeting 12.5% in March 2020, when it plunged after the pandemic suddenly brought the global economy to a halt.
The Dow Jones Industrial Average gained 1.2% to 35,131.86. The Nasdaq jumped 3.4% to 14,239.88. Both also ended in the red in January, with the Dow Jones losing 3.3% and the Nasdaq losing 9%.
The Federal Reserve is about to start withdrawing the huge stimulus it injected into the economy and the markets.
But uncertainty about the extent and speed with which the Fed will act has helped cause serious swings on Wall Street.
“There is systematic buying at the end of a very bad month like January, and that has certainly taken place over the past two days,” said Scott Lander, chief investment officer at Horizon Investments.
The heaviest losses of the month were concentrated in the parts of the stock market considered the most expensive. Much of the focus was on high-growth tech stocks, which were absolute stars of the pandemic amid expectations they could grow regardless of the economy.
S&P 500 technology stocks rose 2.7% on Monday, but the sector ended the month down 6.9%. The monthly decline was much deeper for tech stocks like chipmaker Nvidia, which jumped 7.2% on Monday but saw a 16.7% slippage for January.
The stock market is struggling to adjust to higher rates. When bonds pay more interest, investors feel less of a need to seek out stocks and other riskier investments in search of returns. This time, the Fed is also turning off what’s colloquially known as the “money printer” it uses to buy bonds to keep long-term rates low, and it’ll likely soon remove some of those extra dollars that circulate in the economy.
The market could face an even tougher time than usual with this rate hike campaign, as the Fed will act when economic growth and corporate earnings are likely to slow, according to strategists at Morgan Stanley.
They pointed to what they see as worrying signs in U.S. manufacturing data, among other factors.
“We remain rally sellers and believe the fair value of the S&P 500 remains tactically closer to 4,000,” the strategists led by Michael Wilson wrote in a report.
Others on Wall Street are not so pessimistic. This is largely due to general expectations that corporate earnings will continue to grow, since stock prices tend to follow corporate earnings over the long term. For the full year 2022, analysts expect S&P 500 earnings to rise 9.5%, according to FactSet.
“By now it should be clear that the sharp pivot in monetary policy will make this year very different from last,” wrote Solita Marcelli, chief investment officer of UBS Global Wealth Management, Americas, in a recent note. “Still, we believe investors should keep in mind that the economy remains strong, which should limit declines from current levels.”
The 10-year Treasury yield rose to 1.78% from 1.77% on Friday. The two-year yield, which moves more in line with expectations about what the Fed will do with short-term rates, rose to 1.18% from 1.15%.
The Fed seems entitled to act aggressively, with inflation at its highest level in nearly 40 years and a job market that looks solid.
In energy trading, benchmark U.S. crude added 20 cents to $88.35 a barrel in electronic trading on the New York Mercantile Exchange. It gained $1.33 to $88.15 a barrel on Monday. Brent crude, the international standard, rose 22 cents to $89.48 a barrel.
In currency trading, the US dollar fell to 115.08 Japanese yen from 115.13 yen. The euro traded at $1.1233, down from $1.1236.
AP Business Writers Stan Choe and Alex Veiga contributed.