Japan’s benchmark Nikkei 225 inched up 0.5% to 27,139.89 and Australia’s S&P/ASX 200 added 0.4% to 6,996.80
Asian shares gained Tuesday, mirroring broad overnight gains on Wall Street, while trading in China and most other regional markets was closed for Lunar New Year holidays.
Japan’s benchmark Nikkei 225 inched up 0.5% in morning trading to 27,139.89. Australia’s S&P/ASX 200 added 0.4% to 6,996.80.
Wall Street closed a tumultuous January wracked by worries that interest-rate hikes will make everything in markets more challenging. Shares closed higher but still logged their worst monthly loss since the early days of the pandemic.
Investors expect the Federal Reserve to begin 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 supported stunning gains.
The S&P 500 came back from an early dip to close 1.9% higher at 4,515.55. Even so, the benchmark index dropped 5.3% in January, its worst month since falling 12.5% in March 2020, when it plunged after the pandemic suddenly shut down the global economy.
The Dow Jones Industrial Average advanced 1.2% to 35,131.86. The Nasdaq climbed 3.4% to 14,239.88. Both also ended in the red for January, with the Dow declining 3.3% and the Nasdaq shedding 9%.
The Federal Reserve is about to start withdrawing the tremendous stimulus it’s pumped into the economy and markets.
But uncertainty about how sharply and how quickly the Fed will move has helped cause severe swings on Wall Street.
There’s systematic buying that goes on at the end of a really bad month like January, and that’s certainly taken place over the last day or two, said Scott Lander, chief investment officer at Horizon Investments.
The month’s heaviest losses have concentrated on parts of the stock market seen as the most expensive. Much of the focus has been on high-growth technology stocks, which were absolute stars of the pandemic amid expectations they can grow regardless of the economy.
Tech stocks in the S&P 500 gained 2.7% Monday but the sector finished the month down 6.9%. The monthly drop was far deeper for tech stocks like chipmaker Nvidia, which climbed 7.2% Monday, but posted a 16.7% decline for January.
The market may have an even tougher time than usual with this rate-hike campaign, because the Fed is going to be moving when growth for the economy and corporate earnings may be set to slow, say strategists at Morgan Stanley.
They pointed to what they see as worrying signs in data about U.S. manufacturing, among other factors.
We remain sellers of rallies and of the view that S&P 500 fair value remains closer to 4,000 tactically, the strategists led by Michael Wilson wrote in a report.
