Asian shares were mostly lower on Wednesday as rising bond yields intensified pressure on equities and other assets, undermining the artificial intelligence-fueled rally in technology stocks. Bond yields have been climbing amid the ongoing conflict with Iran, stoking concerns about prolonged higher inflation.
Japan and China Markets Decline
In Japan, the Nikkei 225 fell 1.2% to 59,834.15. The yield on the 10-year Japanese government bond slipped to just below 2.8%, remaining at its highest level since 1997. The dollar traded at 159.00 Japanese yen, slightly down from 159.09 yen, while the euro slipped to $1.1601 from $1.1608.
Chinese shares also declined. Hong Kong's Hang Seng index dropped 0.6% to 25,635.82, and the Shanghai Composite index shed 0.5% to 4,148.16. Australia's S&P/ASX 200 fell 0.8% to 8,533.60.
Mixed Performance in Other Asian Markets
In South Korea, the Kospi gained 0.3% to 7,292.41 after a broad sell-off the previous day. Taiwan's Taiex rose 0.4%. U.S. futures were little changed after the S&P 500 fell 0.7% on Tuesday, closing at 7,353.61 for its third consecutive loss since hitting an all-time high. The Dow Jones Industrial Average dropped 0.6% to 49,363.88, and the Nasdaq composite sank 0.8% to 25,870.71.
Tech Stocks Under Pressure
Technology stocks are faltering following massive gains driven by excitement over artificial intelligence, which critics argue has made them overvalued. Meanwhile, oil prices have been volatile due to uncertainty about how long the Iran conflict will keep the Strait of Hormuz closed to oil tankers.
Attention on Wednesday is focused on Nvidia's latest quarterly results. The chipmaker has consistently surpassed analysts' expectations and provided forecasts that have topped Wall Street's predictions. Its performance could determine whether technology stocks and the broader U.S. market can sustain their rally. Nvidia fell 0.8% on Tuesday and was one of the heaviest weights on the S&P 500 due to its massive size.
Corporate Earnings and Bond Market Impact
Akamai Technologies dropped 6.3%, one of the sharpest losses on Wall Street, after the cybersecurity and cloud computing company announced plans to raise $2.6 billion through a convertible note offering. Home Depot rose 0.9% after reversing an early loss following its latest earnings report. Its profit and revenue slightly exceeded analysts' expectations, but a key measure of performance for stores open more than a year fell short of some forecasts.
CEO Ted Decker stated that Home Depot saw similar customer demand as last year, "despite greater consumer uncertainty and housing affordability pressure."
Many large U.S. companies have reported stronger-than-expected quarterly profits, partly due to consumers continuing to spend despite high gasoline prices and other challenges. This has helped push U.S. stock indexes to record highs, but unease in the bond market threatens that momentum.
Rising Bond Yields
The yield on the 10-year Treasury rose to 4.66% from 4.61% late Monday, up from less than 4% before the war with Iran began. This significant increase is part of a global climb that makes stock prices appear even more expensive and risks slowing the economy.
Higher yields can drive up rates for mortgages and loans to companies building AI data centers, a major source of economic growth. Yields rose even as oil prices eased. Early Wednesday, U.S. benchmark crude oil was down 45 cents at $103.70 per barrel. Brent crude, the international standard, lost 50 cents to $110.78 per barrel. The average price for a gallon of gasoline rose again overnight to $4.53, according to the AAA motor club, about 43% higher than last year at this time.
