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Asian shares rise, trading closed in Korea, China for the holiday

TOKYO –

Asian stocks rallied on Tuesday, reflecting overnight gains on Wall Street, while trading in China and most other regional markets was closed for the Lunar New Year holiday.

Japan’s benchmark Nikkei 225 rose 0.3% to 27,078.48. Australia’s S&P/ASX 200 rose 0.5% to 7,006.00.

Wall Street ended a volatile January with worries that a rate hike would make things more difficult in the market. Shares closed higher but still recorded their worst monthly loss since the early days of the pandemic.

Investors expect the Federal Reserve to begin raising interest rates in March to combat inflation. Ultra-low rates and other stimulus measures helped the market recover from the initial shock of the coronavirus pandemic, and then supported a staggering rally.

The S&P 500 bounced back from its initial decline to close 1.9% higher at 4,515.55. Even so, the benchmark index fell 5.3% in January, its worst month since a 12.5% ​​drop in March 2020, as it plunged after the pandemic abruptly shut down the economy. Global.

The Dow Jones Industrial Average rose 1.2% to 35,131.86. Nasdaq rose 3.4% to 14,239.88. Both also ended in the red in January, with the Dow down 3.3% and the Nasdaq losing 9%.

The Federal Reserve is about to start pulling back on the massive stimulus it has pumped into the economy and markets.

But uncertainty about how and how quickly the Fed will move has helped cause severe volatility on Wall Street.

The heaviest losses for the month focused on the parts of the stock market that were considered the most expensive. Much of the focus has been on high-growth tech stocks, which have been the absolute stars of the pandemic amid expectations they can thrive regardless of the economy.

Technology shares in the S&P 500 rose 2.7% Monday but the sector ended the month down 6.9%. The monthly decline was much deeper for tech stocks like chipmaker Nvidia, which rose 7.2% on Monday, but fell 16.7% in January.

The stock market tends to struggle to adjust to higher rates. As bonds pay more interest, investors feel less need to reach for stocks and riskier investments in search of returns. This time, the Fed is also shutting down what is often called the “money printing machine” it uses to buy bonds to keep long-term interest rates low, and it is likely to soon remove some of the dollars. redundancy around the economy.

Strategists at Morgan Stanley said the market could have a tougher time than usual with this rate hike campaign, because the Fed will move as the economy’s growth and corporate earnings likely slowed down, strategists at Morgan Stanley said in a report.

They pointed to what they saw as worrying signs in data on US manufacturing, among other factors.

Others on Wall Street are not so pessimistic. That’s largely due to widespread expectations that corporate profits will continue to rise, as stock prices tend to track corporate profits over the long term. For the full year of 2022, analysts expect S&P 500 earnings to grow 9.5%, according to FactSet.

The yield on the 10-year Treasury note rose to 1.78% from 1.77% on Friday. Two-year yields, which depend more on expectations of what the Fed will do with short-term rates, rose to 1.18% from 1.15%.

The Fed appears to have the license to act aggressively, with inflation at its highest level in nearly 40 years and the job market looking strong.

In energy trading, the price of benchmark US crude added 15 US cents to $88.30 per barrel in electronic trading on the New York Mercantile Exchange. It rose $1.33 to $88.15 per barrel on Monday. Brent crude, the international standard, rose $1.18 to $91.21 a barrel.

In currency trading, the US dollar fell from 115.13 yen to 114.98 Japanese yen. The euro is priced at $1.1250, up from $1.1236.

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Associated Press Business Writers Stan Choe and Alex Veiga contributed.

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