(Bloomberg) — Asian stocks markets opened on a cautious note Tuesday ahead of key economic data from China and after stocks on Wall Street eked out small gains late in the session.

Shares were slightly higher in Japan while benchmarks fell in South Korea and Australia. Futures for Hong Kong pointed to small declines. The possibility of further Federal Reserve policy tightening lifted Treasury yields and constrained US stocks, with the S&P 500 erasing losses in afternoon trading and the tech-heavy Nasdaq 100 underperforming major equity benchmarks.

The dollar was fractionally higher versus its major counterparts, adding to gains of the past two days. Government bond yields in Australia and New Zealand rose in the slipstream of moves Treasuries overnight.

Treasuries were little changed at the Asia open, with yield on the two-year note just below 4.2%. Richmond Fed President Thomas Barkin said he wants to see more evidence that US inflation is easing back to the central bank’s goal of 2%. New York state manufacturing activity unexpectedly expanded in April for the first time in five months as new orders and shipments snapped back.

Much of the focus in Asia will be on China and the strength of its economic recovery. Figures on Tuesday are projected to show gross domestic product expanded 4% in the first quarter from a year earlier, well below the government’s target for full-year growth of around 5%. March data may show increases in industrial output, investment and retail sales.

Meanwhile, minutes from the Reserve Bank of Australia’s policy meeting earlier this month will be parsed for signs that rates may be lifted again after a pause, while Indonesia’s central bank is expected to keep its benchmark unchanged.

A gauge of cross-asset volatility remained at 14-month low, reflecting a growing assurance that the worst of the banking turmoil and US rate hikes may be over. The VIX Index, another volatility measure, sat below 17, its lowest since the start of last year.

Still, US bank earnings on Monday didn’t entirely relieve investor nervousness that the sector can quickly bounce from turmoil that roiled several lenders earlier this year, as a so-called earnings recession in the world’s biggest economy looms.

Charles Schwab Corp. rose as executives said the firm can weather the turmoil roiling US banks, while pausing stock buybacks in response to the industry’s worst crisis since 2008. State Street Corp. fell as it reported clients retreated from its investment products.

With the earning season starting, “we’ve had estimates be revised lower for this quarter, they’re down around 7%, which is a pretty low bar to step over and I think you’re starting to see companies do that,” Walter Todd, chief investment officer at Greenwood Capital, said on Bloomberg Radio. “The risk lies in the second half of the year, perhaps in the earnings that need to be revised down in that period.”

“The risk-reward for equities does not look attractive into the second half in light of risk-free hurdle rate at 5%,” a team of strategists at JPMorgan Chase & Co., including Marko Kolanovic, wrote in a note. “The main disconnect revolves around the hopes of a soft landing with inflation coming down quickly.”

Elsewhere, oil was steady after West Texas Intermediate posted its biggest loss in a month on Monday. Gold was little changed.

The bust of the stock market bubble will only be halfway over when the Federal Reserve starts cutting interest rates, according to GMO founder Jeremy Grantham. He expects that to happen in late 2024.

The legendary investor — who’s made his name predicting market crashes across multiple decades — predicts even more gloom ahead in the market. Previously, Grantham said stocks were in the “final phase” before crashing, and asset prices that ballooned in recent years could soon pop as the economy risks facing a steep recession.

Though some investors are looking for signs of the next bull market, that’s the wrong way to think about stocks in the current environment, Grantham said. “Great Bubbles” in the stock market are different from typical bull and bear markets, meaning it’s likely there’s another round of pain ahead.

“Most of the decline in these great bear markets only happens after the first interest rate cut. So you tell me when the first interest rate cut is, and I will tell you when the second half of the pain is going to start,” Grantham said in an interview with The Investor’s Podcast on Friday.

Investors have already seen hefty losses over the last year amid rising inflation and higher interest rates, which have taken away the liquidity that previously caused asset prices to soar. Central bankers have raised interest rates 475 basis-points to tame inflation, a move that caused the S&P 500 to tank 20% in 2022, with the index now down 14% from its all-time-record in 2021.

Fed Chair Jerome Powell has said rates will stay elevated through the rest of this year, which is expected to hinder stock performance. But markets are pricing in a 33% chance of a 25 basis-point rate cut as soon as July, according to the CME FedWatch tool, partly because interest rates at these levels could easily push the economy into recession.

Stocks could crash as much as 50% if the economy enters a severe recession, Grantham previously predicted. Though his forecasts are on the more bearish end of the spectrum, his view mirrors that of other Wall Street strategists, who say a recession and stock market downside are extremely likely in 2023.

By Noel Randewich and Ankika Biswas

(Reuters) – The S&P 500 dipped and the Nasdaq ended sharply lower on Wednesday after a growing wave of weak economic data deepened worries that the Federal Reserve’s rapid interest rate hikes might tip the U.S. economy into a recession.

Nvidia Corp dropped 2.1% and was among the stocks weighing most on the S&P 500 after Alphabet Inc’s Google unit said the supercomputers it uses to train its artificial intelligence models were faster and more power-efficient than comparable components made by the chipmaker.

Tesla Inc fell 3.7%, while Amazon and Apple declined more than 1%, pulling down the Nasdaq and reversing gains in some of Wall Street’s most valuable companies in recent weeks.

Caterpillar, viewed as a bellwether for the industrial sector, dropped 1.8%, bringing its loss over the past two days to 7% as investors fretted about a potential economic downturn.

GRAPHIC: S&P 500’s busiest trades    https://fingfx.thomsonreuters.com/gfx/mkt/egvbylkbapq/SPX_by_busiest_trades.png

The S&P 500 declined 0.25% to end the session at 4,090.38 points.

The Nasdaq fell 1.07% to 11,996.86 points, while the Dow Jones Industrial Average rose 0.24% to 33,482.72 points.

Driving the recession fears, the ADP National Employment report showed U.S. private employers hired far fewer workers than expected in March. That followed Tuesday’s weak job openings data.

As well, the Institute for Supply Management’s survey showed the services sector slowed more than expected last month on cooling demand, while a measure of prices paid by services businesses fell to a near three-year low.

Earlier this week data showed falling factory orders and soft manufacturing activity.

Wall Street’s recent losses in reaction to signs of a slowing economy mark a change from recent months, when investors cheered weak economic data on the basis that it might mean the Fed’s interest rate hikes were working and that the Fed could ease up on its campaign to rein in decades-high inflation.

“We may have transitioned from the notion that ‘bad news is good news’ to ‘bad new is bad news’,” said Jay Hatfield, chief executive and portfolio manager at InfraCap in New York. “Fear about a recession is the dominant theme.”

Reflecting worries about the economy and recent turmoil in the banking sector, interest rate futures imply 61% odds that the Fed will cut interest rates from current levels by the end of its July meeting, according to CME Group’s Fedwatch tool.

GRAPHIC: Traders bet on Fed rate cut by July meeting   https://www.reuters.com/graphics/USA-RATES/FEDWATCH/egpbyjlzxvq/chart.png

Of the 11 S&P 500 sector indexes, seven declined, led lower by consumer discretionary, down 2.04%, followed by a 1.3% loss in industrials.

Among stocks that kept the Dow Jones Industrial Average in positive territory, Johnson & Johnson rallied 4.5% after its $8.9 billion offer to settle talc-related lawsuits gained the support of thousands of claimants, easing an overhang on its plans to list consumer health unit Kenvue.

Artificial intelligence C3.ai Inc tumbled more than 15%, sliding for a second day after a short seller alleged accounting issues. The AI company denied the allegations in an emailed response to Reuters.

FedEx Corp rose 1.5% as the freight bellwether firm said it will fold its operating divisions into one organization as it steps up efforts to cut costs and increase efficiency.

Big banks including JPMorgan Chase & Co and Citigroup will be among companies kicking off March-quarter reporting season next week, with investors eager for updates on the health of the financial industry.

Analysts on average expect aggregate S&P 500 company earnings for the first quarter to have fallen 5% year-over-year, according to Refinitiv I/B/E/S.

Declining stocks outnumbered rising ones within the S&P 500 by a 1.2-to-one ratio.

The S&P 500 posted 11 new highs and two new lows; the Nasdaq recorded 39 new highs and 269 new lows.

Volume on U.S. exchanges was relatively light, with 10.1 billion shares traded, compared to an average of 12.7 billion shares over the previous 20 sessions.

By Yasin Ebrahim 

Investing.com — The Dow closed lower Tuesday, as a slump in industrials and a wobble in banks amid fresh jitters that the banking turmoil isn’t over just weighed on investor sentiment.

The Dow Jones Industrial Average slipped 0.59% or 198 points, and the Nasdaq fell 0.5%, and the S&P 500 fell 0.6%.

Regional banks including Zions Bancorporation (NASDAQ:ZION), First Republic Bank (NYSE:FRC), and Comerica (NYSE:CMA) led the selloff in financials as JPMorgan chief executive warned that the banking crisis was far from over and the impact of the turmoil in the sector will likely reverberate for years.

The warning arrived just as data showed job openings fell more than expected last month, adding to concerns about the economy just as Federal Reserve members continue to call for higher rates.

The U.S. Labor Department’s latest Job Openings and Labor Turnover Survey, or JOLTs report, a measure of labor demand, showed job openings in February fell to about 9.9 million, missing expectations of 10.4M.

Industrials, meanwhile, was also a big drag on the broader market, paced by a decline in Caterpillar Inc. (NYSE:CAT) and United Rentals, Inc. (NYSE:URI) after Baird downgraded the stocks to underperform.

Baird said both companies will likely see a dent in building activity as the banking turmoil in regional banks, which account for about 70% of commercial real estate loans, leads to reduced lending activity.

Boeing Co. (NYSE:BA), a major Dow component, fell nearly 1% after Northcoast Research downgraded the company to sell from neutral amid worries that engine maker CFM International won’t be able to deliver enough engines to the aircraft maker, curbing its growth.

Energy, meanwhile, gave up its gains from a day earlier as oil prices as investor focus shifted to the impact of a slowing global economy on crude demand.

Marathon Oil Corporation (NYSE:MRO), Phillips 66 (NYSE:PSX), and Valero Energy Corporation (NYSE:VLO) were among the biggest losers, with the latter more than 8%.

In other news, Virgin Orbit Holdings (NASDAQ:VORB) fell 23% as the satellite launch company filed for Chapter 11 bankruptcy protection after recently announcing that it would cut the bulk of its staff as it failed to secure funding.