Asian shares mostly declined on Wednesday, reversing gains seen earlier in the week despite U.S. stocks reaching all-time highs on expectations for strong corporate earnings. U.S. futures remained little changed, while oil prices advanced.
In Tokyo, the Nikkei 225 dropped 0.9% to close at 70,284.81. South Korea's Kospi also lost 0.9%, ending the session at 6,876.76. Hong Kong's Hang Seng index fell 0.6% to 24,129.96, and Taiwan's Taiex edged down 0.2%. Markets in Shanghai were closed for a national holiday. In Australia, the S&P/ASX 200 rose slightly by 0.1% to 8,740.10.
The retreat in Asia followed a day of record-setting highs in the United States. On Tuesday, the S&P 500 climbed 0.6% to a record 7,818.93, surpassing its previous all-time high from August. The index has surged 23% since its trough in late March, despite concerns over the war in Iran, high inflation, and bond market pressures. The Dow Jones Industrial Average added 0.5% to finish at 51,521.28, while the Nasdaq composite rose 0.4% to a new high of 27,599.79.
Ng Jing Wen of Mizuho Bank noted that the rally reflects confidence that corporate earnings, particularly in technology and AI-related sectors, can withstand elevated energy costs and restrictive interest rates. She stated that this resilience suggests investors continue to prioritize earnings momentum over near-term inflation risks.
Strong corporate results have provided vital support for the market, even as other fears have materialized. Oil prices remain high due to the conflict in Iran, contributing to inflation, while higher yields in the bond market threaten to slow economic activity by increasing borrowing costs. Americans have also expressed growing pessimism about the economy and the rising cost of living.
Lamb Weston demonstrated this earnings strength on Tuesday, reporting that its profit and revenue for the latest quarter exceeded projections and analyst expectations. The company's stock rallied 7.5% on the news. Delta Air Lines is scheduled to report its third-quarter results on Friday, with major banks set to report next week.
Analysts expect S&P 500 companies to deliver nearly 30% growth in earnings per share compared to a year earlier, according to FactSet data. If accurate, this would mark the third consecutive quarter of growth exceeding 25%. However, if companies fail to meet these high expectations, stock prices could fall from their record levels. Some critics also warn of a potential bubble in the artificial intelligence sector following significant price surges.
AI stocks have been a primary driver of recent market gains, including Nvidia's 28.3% increase year-to-date, which is roughly double the broad market's gain. Bond yields provided some relief on Tuesday after falling from multi-year highs. The yield on the 10-year Treasury eased to 5.28% from 5.31% late Monday following a stabilization in oil prices.
Crude oil prices rebounded early Wednesday. Brent crude, the international standard, rose 0.9% to $101.49 per barrel, remaining below the nearly $110 level seen a few weeks ago. U.S. benchmark crude also increased by 0.9% to $90.21 per barrel.
Currency movements early Wednesday showed the U.S. dollar rising to 158.44 Japanese yen from 158.10 yen, while the euro slipped to $1.1238 from $1.1260.