BANGKOK (AP) — Stocks are mostly higher in Asia after a strong rally on Wall Street pushed the Dow Jones Industrial Average to a record high as the Federal Reserve suggested interest rate cuts were likely next year.
However, the Nikkei 225 in Tokyo fell as the yen rose sharply against the U.S. dollar, as a weaker dollar can hit Japanese exporters' profits when they are brought back to Japan.
The Nikkei lost 1% to 32,594.89, while the dollar slipped from about 145 yen to 141.42 yen, its lowest level in four months. The value of the dollar tends to reflect interest rate expectations, which affect the returns of certain types of investments.
Toyota Motor Corp. shares fell 4.2% and Sony Corp. lost 2.3%. Honda Motor Co. fell 5.2%.
Elsewhere in Asia, Hong Kong's Hang Seng Index climbed 1.1% to 16,408.26 and the Shanghai Composite Index rose 0.3% to 2,977.56.
A World Bank report predicts that China's economy will post annual growth of 5.2% this year but will slow significantly to 4.5% in 2024, leaving it still “fragile.”
Australia's S&P/ASX 200 rose 1.6% to 7,373.70 and Seoul's Kospi rose 1.1% to 2,536.94. India's Sensex gained 1.1% and the SET in Bangkok also gained 1.1%.
On Wednesday, the Dow jumped 512 points, or 1.4%, to 37,090.24. The S&P 500 rose 1.4%, closing in on its own record, closing at 4,707.09. The Nasdaq Composite also gained 1.4% to 14,733.96.
Wall Street loves lower interest rates because they ease pressure on the economy and drive up prices for all types of investments. Since October, markets have been rallying as investors hope for possible cuts.
The record close for the Dow Jones Industrial Average:
- Why it matters for investors: The Dow's rise is an indication that some established, well-known companies like JPMorgan and newer companies like Microsoft and Apple are having very good years.
- Does it matter to non-investors? The underlying reasons for the stock market's rise should be important to all consumers: Inflation is cooling, and it appears that the Federal Reserve is done raising interest rates and could start cutting them sometime next year .
- What's next? Some analysts expect further gains on the stock markets this month and into 2024. Others say the delayed impact of the Fed's rate cuts could push the economy into recession sometime next year.
Interest rate cuts particularly benefit investments that are considered expensive, of lower quality, or that force their investors to wait the longest for big growth. Bigger winners on Wednesday included Bitcoin, which rose nearly 4%, and the Russell 2000 index of small U.S. stocks, which rose 3.5%.
Apple was the biggest force pushing the S&P 500 higher, rising 1.7% to its own record close. It and other Big Tech stocks have been a key reason for the S&P 500's 22.6 percent rally this year.
The Federal Reserve kept its key interest rate in a range of 5.25% to 5.50%, as widely expected. That's an increase from virtually zero at the start of last year. It managed to bring inflation down from its peak of 9% while the economy remained solid.
In a news conference on Wednesday, Fed Chair Jerome Powell said the benchmark interest rate is likely already at or near its peak. However, he admitted that inflation was still too high. Powell said Fed officials didn't want to wait too long before cutting interest rates, which are at their highest level since 2001.
“We recognize the risk that we would wait too long” before cutting rates, he said. “We know this is a risk and we are very focused on not making this mistake.”
Prices at the wholesale level were just 0.9% higher in November than a year earlier, the government reported on Wednesday. That was weaker than economists expected.
Treasury yields collapsed in the bond market. The yield on the 10-year Treasury note fell to 3.98% early Thursday from 4.21% late Tuesday. It topped 5% in October, its highest level since 2007. The two-year yield, more in line with Fed expectations, fell to 4.43% from 4.73%.
In other trading, benchmark U.S. crude rose 14 cents to $69.61 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the price rose 86 cents to $69.47.
Brent crude, the international standard, rose 25 cents to $74.51 a barrel.
The euro rose from $1.0876 to $1.0904.
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AP business reporter Stan Choe contributed.