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

TOKYO -- Asian shares were mixed in choppy trading Thursday after a report showed evidence that inflation in the United States was cooling, even if it remains too high.

Japan's benchmark Nikkei 225 dipped nearly 0.1% in afternoon trading to 29,102.25. Australia's S&P/ASX 200 slipped 0.1% to 7,249.00. South Korea's Kospi added 0.1% to 2,499.99. Hong Kong's Hang Seng lost 0.4% to 19,693.89, while the Shanghai Composite was little changed, inching up less than 0.1% to 3,319.53.

Concerns about the Chinese economy remain a major focus, especially for the Asian region, with the latest cause for worry coming from trade data released Tuesday.

“China could be heading into a deflationary funk similar to the one that Japan is starting to emerge from,” said Stephen Innes, managing partner at SPI Asset Management.

On Wall Street, the S&P 500 rose 0.2% to 4,129.20 after swinging between gains and losses through the day. The Dow Jones Industrial Average slipped 0.2% to 33,487.87, while the Nasdaq composite rallied 1% to 12,306.44.

Bond prices climbed after the highly anticipated report said inflation at the consumer level edged down to 4.9% last month, its lowest level in two years. That was slightly better than economists expected, and other underlying measures of inflation also came in very close to forecasts.

Because of that, Wall Street still sees the door open for the Federal Reserve to leave interest rates alone at its next meeting in June. That would be the first time it hasn’t raised rates at a meeting in more than a year, and a pause would offer some breathing room for the economy and financial markets.

“The concern coming in was that it would be hotter than feared,” said Ross Mayfield, investment strategy analyst at Baird. “While not exactly an exciting report, I think there was enough good news baked in that it shouldn’t impact the Fed or the economic trajectory all that much.”

The Fed has jacked up rates at a furious pace in hopes of driving down inflation. But high rates do that by slowing the entire economy and hitting investment prices broadly. They’ve already sent stock prices tumbling, caused turmoil in the banking system and dragged on the economy enough that many investors expect a recession to hit this year.

Following the report, traders upped the probability they see of the Fed holding rates steady in June to nearly 94%, according to data from CME Group.

Stocks that benefit the most from an easing of interest rates led the way on Wall Street, including Big Tech and other high-growth stocks. Amazon's 3.3% rise and Microsoft's 1.7% climb were the two biggest forces pushing the S&P 500 higher.

Inflation still remains way above the Fed's 2% target and continues to squeeze households across the economy, particularly those with the lowest incomes.

The majority of companies in the S&P 500 have topped profit forecasts so far this reporting season, which is approaching its final stretch. But they're still on pace to report an overall drop in earnings from a year earlier, which would be the second straight quarter that's happened.

In the bond market, increased hopes for a coming pause from the Fed on rates pushed yields lower.

The yield on the 10-year Treasury fell to 3.43% from 3.52%. It helps set rates for mortgages and other important loans. The two-year Treasury yield, which moves more on expectations for Fed action, fell to 3.90% from 4.03%.

Besides worries about interest rates and inflation, some corners of the bond market are also swinging on concerns about the U.S. government inching closer to a possible default on its debt. That's never happened before, and economists warn a default could be catastrophic for the economy and financial markets.

In energy trading, benchmark U.S. crude rose 70 cents to $73.26 a barrel. Brent crude, the international standard, added 75 cents to $77.16 a barrel.

In currency trading, the U.S. dollar was little changed at 134.24 Japanese yen, down slightly from 134.28 yen. The euro cost $1.0980, down from $1.0984.

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AP Business Writer Stan Choe contributed from New York.