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Wednesday May 25th, 2022 12:26PM

US stocks are off to another weak start, led lower by tech

By The Associated Press
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Stocks are off to another weak start Tuesday as traders try to calibrate how markets and the economy will handle the higher interest rates that are likely on the way from the Federal Reserve this year. The S&P 500 slipped 0.2%. The index is coming off five straight losses and hasn’t had a winning day since the very first trading day of the year. Technology stocks were again the biggest weight on the market, and the Nasdaq was down 0.2%. The yield on the 10-year Treasury note remained at 1.77%. Bond yields have risen sharply since the beginning of the year.

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

TOKYO (AP) — European benchmarks rose Tuesday but Asian shares mostly declined following a retreat on Wall Street.

France's CAC 40 added 0.6% in early trading to 7,160.56, while Germany's DAX added 0.7% to 15,882.28. Britain's FTSE 100 rose 0.4% to 7,474.60. U.S. shares were set to drift higher with Dow futures inching up less than 0.1% to 35,965.00. S&P 500 futures rose nearly 0.1% to 4,664.50.

Investors are keeping an eye on rising numbers of coronavirus cases, especially in China, where a third city has locked down its residents because of a COVID-19 outbreak, raising the number confined to their homes to about 20 million people.

“In China, upward momentum quickly faded and reversed as COVID-19 restrictions were tightened once again in some Chinese cities,” said Jeffrey Halley, senior market analyst at Oanda.

Such disruptions can have regionwide implications for trade and other activity. Major companies, including automakers such as Toyota, had been counting on a recovery in the supply of semiconductor chips and other products from China and the rest of Asia, as vaccinations and other coronavirus prevention efforts has advanced. The recent surge in infections by the omicron variant of coronavirus has shaken such hopes.

Japan is also seeing a dramatic surge in reported COVID cases, which experts say are mostly omicron. Japan decided to keep strict border controls through next month, which ban the entry of travelers except for returning residents and citizens. Prime Minister Fumio Kishida said the large-scale facilities run by the Japanese military to give vaccinations, which had closed last year, will reopen to speed up booster shots. So far, fewer than 1% of the population have received boosters.

Japan’s benchmark Nikkei 225 fell 0.9% to finish at 28,222.48, coming back from a national holiday Monday. South Korea’s Kospi picked up less than 1 point to 2,927.38. Australia’s S&P/ASX 200 dipped 0.8% to 7,390.10. Hong Kong’s Hang Seng inched down less than 0.1% to 23,739.06, while the Shanghai Composite index sank 0.7% to 3,567.44.

High inflation is taking a toll on American families, Federal Reserve Chair Jerome Powell acknowledged in remarks to be delivered at a Tuesday congressional hearing on Powell's nomination to a second four-year term.

Higher interest rates make stocks of expensive tech companies and other pricey growth companies less attractive to investors and the sector has been slipping as bond yields rise. The tech sector has been the biggest weight on the market through January and is coming off of its worst week since October 2020.

Hiking interest rates could rein in surging prices, but they would also mark an end to easy money conditions that have kept financial markets booming since the first shocks of the pandemic in early 2020. The market now puts the chances of the Fed raising short-term rates by at least a quarter point in March at around 78%. A month ago, it was about 36%.

Looking ahead, the U.S. Labor Department will release the Consumer Price Index for December on Wednesday. The agency will give investors details on how inflation is impacting businesses with its Producer Price Index for December on Thursday. On Friday, Citigroup, JPMorgan Chase and Wells Fargo will report their latest quarterly financial results.

In energy trading, U.S. benchmark crude rose $1.30 to $79.53 a barrel in electronic trading on the New York Mercantile Exchange. It lost 67 cents to $78.23 on Monday.

Brent crude, the international standard, added $1.18 to $82.05 a barrel.

In currency trading, the U.S. dollar rose to 115.27 Japanese yen from 115.20 yen. The euro cost $1.1348, up from $1.1326.

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