Stock drop eases after wobbly gains on Wall St

Share prices ended mixed in Asia yesterday, with Philippine stocks easing their drop, after a wobbly day of trading yielded modest gains on Wall Street.

The benchmark Philippine Stock Exchange index or PSEi shaved off 7.19 points or 0.11 percent to close at 6,575.67 while the broader All Shares index lost 0.31 point or 0.009 percent to finish at 3,496.90.

“US and Asian stocks have calmed down and there is a sense of relief buying. Still, a wait-and-see mood ahead of next week’s FOMC (Federal

Open Market Committee) meeting and US retail sales to be announced tonight,” DA Market Securities said in a note.

A total of P5.48 billion worth of shares changed hands yesterday, with gainers outnumbering losers, 90 to 74, while 51 stocks were unchanged.

Trading was tentative in New York on Wednesday, a day after the market’s worst drop in two years was set off by fears that higher interest rates could cause a recession.

A report on inflation at the wholesale level showed prices are still rising rapidly, with pressures building underneath the surface, even if overall inflation slowed. It echoed a report on inflation at the consumer level Tuesday, which raised expectations for interest-rate hikes and triggered a rout for markets.

Traders now see a one-in-four chance the US Federal Reserve may hike its benchmark rate by a full percentage point next week, quadruple the usual move, according to the CME Group. A day earlier, it was closer to a one-in-three chance. The site puts the probability of a three-quarter percentage point increase now at 76 percent, up from 69 percent on Tuesday.

The central bank has already raised its benchmark interest rate four times this year, with the last two increases by three-quarters of a percentage point.

The Fed is taking the aggressive action on interest rates to try and cool the hottest inflation in four decades. Tuesday’s report on high prices jolted the market with signs that inflation is entering a more stubborn phase that could require an already resolute Fed to become more aggressive.

Wall Street is especially worried that the rate hikes could go too far in slowing the economy and send it into a recession. The Fed is trying to avoid that outcome, but the latest inflation reports suggest that is becoming a more difficult task.