Stock market today: Asian shares mixed in choppy trading after US inflation report

TOKYO, Japan (AP) - Asian shares traded in choppy trades Thursday following a report that showed signs of a cooling in inflation in the United States even if this number remains high.

Nikkei, Japan's benchmark index, fell nearly 0.1% to 29,102.25 in the afternoon. S&P/ASX 200 in Australia fell 0.1% to 7,249.00. South Korea's Kospi rose 0.1% to 2,499.99. Hong Kong's Hang Seng fell 0.4% to 19,693.89 while the Shanghai Composite rose less than 0.1%, to 3,319.53.

The Chinese economy remains a major concern, particularly for the Asian region. Tuesday's trade data is the latest reason for concern.

Stephen Innes said that China could be headed into a deflationary slump similar to what Japan is beginning to emerge from.

Wall Street saw the S&P 500 rise 0.2% to 4,129.20, after swinging back and forth between gains throughout the day. The Dow Jones Industrial Average fell 0.2% to 33 487.87 while the Nasdaq Composite rose 1% to 12 306.44.

The bond market rose after the much-anticipated report revealed that consumer inflation fell to 4,9% in December, the lowest level for two years. This was slightly better than what economists had predicted, and other measures of inflation were also very close to expectations.

Wall Street believes that the Federal Reserve can still leave the interest rates at their next meeting, in June. This would be the first meeting where the Federal Reserve has not raised interest rates in over a year. A pause could give the economy and the financial markets some breathing space.

Ross Mayfield is an investment strategy analyst with Baird. While not an exciting report I believe there were enough positives baked in to ensure that it wouldn't have a significant impact on the Fed and the economy's trajectory.

In an attempt to reduce inflation, the Fed has increased rates rapidly. High rates slow the economy and affect investment prices. Stock prices have already fallen, causing turmoil in the banking sector and dragging on the economy to the point that many investors are expecting a recession this year.

CME Group data shows that traders increased their probability of seeing the Fed hold rates at the same level in June by nearly 94% following the release of the report.

Wall Street was led by stocks that are most likely to benefit from a rate easing, such as Big Tech and high-growth companies. Amazon's 3,3% increase and Microsoft's 1,7% rise were the two main forces that pushed the S&P 500 upward.

The Fed's inflation target is still way above 2%, and it continues to pinch households in the entire economy. This is especially true for those on the lowest incomes.

Most companies in the S&P 500 are on track to report earnings that exceed their forecasts by the end of this reporting period. They're still on track to report a drop in overall earnings from the year before, which would be a second consecutive quarter.

Bond yields fell on the market as investors grew more hopeful that the Fed would pause its rate hikes.

The yield on 10-year Treasury bonds fell from 3.52% to 3.43%. This helps to set mortgage rates and other important loan rates. The yield on the two-year Treasury, which is more sensitive to expectations of Fed action, dropped from 4.03% to 3.90%.

Some bond markets are also swayed by concerns that the U.S. Government is moving closer to defaulting on its debt. This has never happened before and economists warn that a default would be disastrous for the economy and the financial markets.

Energy trading saw benchmark U.S. Crude rise 70 cents, to $73.26 per barrel. Brent crude, which is the international standard, rose 75 cents to $77.16 per barrel.

The U.S. Dollar was unchanged in currency trading at 134.24 Japanese Yuen, a slight decrease from 134.28 Japanese Yen. The euro was $1.0980 down from $1.0984.

Stan Choe, AP Business Writer from New York, contributed to this article.