Stocks tick lower as Wall Street braces for higher rates

NEW YORK — Stocks are drifting lower as Wall Street continues to brace for interest rates to stay higher for longer. The S&P 500 was 0.3% lower early Wednesday in its first trading after coming off a frigid February. The Nasdaq also fell and the Dow was little changed. After a hot start to the year, the stock market has struggled as data piled up showing inflation and the overall economy are remaining more resilient than expected. That forced many investors to delay their forecasts for a recession to later in the year, while also raising their expectations for how high the Federal Reserve will take interest rates.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Wall Street inched modestly higher in premarket trading Wednesday after reports on key measures of China manufacturing showed a strong recovery after anti-virus controls were lifted late last year.

Futures for the Dow Jones industrials and futures for the S&P 500 each rose 0.2% before the bell.

Hong Kong’s Hang Seng index jumped 4.2% and Shanghai gained 1% after purchasing managers’ indexes issued by a business magazine, Caixin, and the official China Federation of Logistics & Purchasing showed gains in production, exports and new orders.

Business activity is recovering in China after the ruling Communist Party ended stringent anti-virus restrictions in early December. That followed a slump in activity that dragged last year’s economic growth to 3%, its second-lowest level since at least the 1970s.

“It was already believed that the transition from zero-COVID to living with it was going smoothly but this survey data suggests businesses are now extremely optimistic about the future,” Craig Erlam of OANDA said in a commentary.

“There’s still a long way to go and there could be setbacks along the way but investors will no doubt be encouraged by these early signs,” he said.

It was good news in Hong Kong, where the Hang Seng gained more than 830 points to 20,619.71.

Hong Kong’s own outlook has improved as it has relaxed pandemic precautions. The territory’s chief executive, John Lee, announced Tuesday t hat masks will no longer be required both outdoors and indoors, but some high-risk areas including hospitals and elderly homes can still require their use.

The Shanghai Composite added nearly 33 points to 3,312.35.

Japan’s benchmark Nikkei 225 picked up 0.3% to close at 27,516.53. Australia’s S&P/ASX 200 edged nearly 0.1% lower to 7,251.60. South Korean markets were closed for a national holiday.

France’s CAC 40 added 0.7% in midday trading, while Germany’s DAX rose 0.6% and Britain’s FTSE 100 jumped 0.9%.

Wall Street closed out a frigid February with more losses on Tuesday. The S&P 500 lost 0.3%, locking in a loss of 2.6% for the month. The Dow industrials fell 0.7%, while the Nasdaq edged 0.1% lower. Both also sank over the month.

After a strong start to the year driven by hopes inflation is abating, Wall Street shifted into reverse in February. A stream of data showed inflation and the overall economy are remaining more resilient than expected. That’s forced investors to raise their forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there.

High rates can drive down inflation, but they also raise the risk of a recession down the line because they hurt the economy. They also drag on prices for stocks and other investments.

Reports on the economy released Tuesday showed some slight cracks. One said that confidence among U.S. consumers fell in February. Another said that manufacturing in the Chicago region weakened by more than expected.

Investors are keeping an eye on the last of the earnings reports for this season.

Kohl’s tumbled 10% before the bell after the department store swung to a surprise loss and posted a drop in sales for the fourth quarter. Kohl’s financial outlook issued Wednesday was also was well below Wall Street expectations.

Several big-name retailers are still on the schedule for this week, including Best Buy, Kroger and Costco.

The yield on the 10-year Treasury held steady at 3.93% Wednesday. It helps set rates for mortgages and other loans that shape the economy’s health, and still near its highest level since November.

The two-year yield, which moves more on expectations for Fed action, was also unchanged from late Tuesday at 4.82%. It’s near its highest level since 2007.

In energy trading, benchmark U.S. crude lost 55 cents to $76.50 in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, fell 36 cents to $83.09 a barrel.

In currency trading, the U.S. dollar fell to $135.35 Japanese yen from $136.20 yen. The euro rose to $1.0678 from $1.0583.


Kageyama reported from Tokyo; Ott reported from Silver Spring, Md.

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