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Shares in Australia and South Korea edged higher, as did US equity futures, after the S&P 500 and Nasdaq 100 both fell on Thursday. Equity trading in Japan is closed for a holiday. Chinese stocks will be in focus after they had their worst start to the year since 2016.
The moves are a sign the selling that has sapped US equities over the past week may be starting to turn. Investors are preparing to implement asset-allocation strategies for the year ahead after a rocky end to 2024.
The decline in US stocks accompanied a rally in the dollar, a popular haven, which set a fresh two-year high Thursday before sagging early Friday. The yen climbed in early trading after a third daily decline against the greenback in the prior session.
US President-elect Donald Trump’s “policies especially on tariffs are inflationary in their very nature,” said Jung In Yun, chief executive officer of Fibonacci Asset Management Global, on Bloomberg Television. “Inflation being very sticky and refusing to come down means we could have the current state of mid-level interest rates for a prolonged period of time.”
Despite small gains in for Treasuries on Thursday, the benchmark 10-year yield ended the session nearly 20 basis points above the level prior to Jerome Powell’s hawkish turn at a Dec. 18 Federal Reserve meeting. Big moves have proliferated across asset classes after Powell’s board expressed waning enthusiasm for interest-rate cuts.
The Fed would find little to support rate cuts in economic data from Thursday. Initial applications for US unemployment fell to an eight-month low, reflecting relatively muted levels of job cuts in a labor market that has remained surprisingly resilient.
Losses for US stocks were partly driven by lackluster results from Tesla Inc. The electronic vehicle-marker’s fourth-quarter deliveries missed estimates and annual sales dropped for the first time in over a decade. The carmaker’s stock has now fallen 18% since Christmas.
The retreat from risk on Thursday also hit Asian stocks. Chinese equities had been the worst performers in the session as data pointed to a slowing economy and traders looked ahead to potentially higher tariffs.
A global gauge of emerging-market stocks dropped to the lowest level since September and neared a 10% decline from a high in early October.
Trading in Treasuries in Asia is closed given the holiday in Japan.
On the corporate earnings front, 2025 will be a “show-me year,” according to Lisa Shalett at Morgan Stanley Wealth Management, who warned that the dominance of the Magnificent Seven — the big technology stocks responsible for the bulk of last year’s gains — was teetering.
“This idea that they as a group can trade together and lead the market may falter in 2025,” she said. As for the slide in the final days of 2024, it’s “too soon to call it a bad omen,” Shalett said on Bloomberg Television.
Losing Streak
US stocks have been straining to snap a losing streak that took some shine off the S&P 500’s best two-year run dating back to the late 1990s. The index has surged more than 50% since the start of 2023, driven by gains in the tech megacaps amid enthusiasm about the boost to profits from artificial intelligence.
Investors will be watching the US House Speaker vote Friday to see if Mike Johnson will retain his position. Republican squabbling over his reelection could bode ill for President-elect Donald Trump’s agenda, according to Tom Essaye, founder of the Sevens report.
Elsewhere in commodities, oil was steady after climbing Thursday on an industry report signaling US crude stockpiles continued to shrink. A report from the American Petroleum Institute showed inventories fell by 1.4 million barrels last week, which would be a sixth straight drop.
Gold was steady at around $2,657 an ounce, after notching its biggest annual gain since 2010 last year. Bitcoin dropped for the first time in four days.
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