Asian benchmarks mostly decline amid lingering China worries

U.S. retail data has shown improvement, while industrial production has dropped, highlighting the resilience of the service sector, as opposed to weakening external demand.

The Fed has been raising interest rates in an effort to slow the economy and tame the hottest inflation in decades. Wall Street has been worried it could hit the brakes too hard and bring on a recession.

Japan's benchmark Nikkei 225 shed 0.4% to finish at 27,930.57. Australia's S&P/ASX 200 gained 0.2% to 7,135.70, after government data showed that the employment situation had improved in October from September.

South Korea's Kospi slipped 1.1% to 2,449.62. Hong Kong's Hang Seng dropped 2.0% to 17,879.00, while the Shanghai Composite fell 0.6% to 3,100.78.

China is maintaining its “zero-COVID” approach of mass testing many people alongside localized lockdowns and quarantines to eliminate the coronavirus entirely. Such restrictions have caused a supply crunch for some of Asia's biggest manufacturers, denting economic growth.

Elsewhere, the lifting of pandemic restrictions have fueled hopes of greater consumer spending and tourism revenue.

On Wall Street, retailers and technology companies led a broad slide Wednesday. The S&P 500 fell 0.8%, wiping out most of its gains from a day earlier. The Dow Jones Industrial Average fell 0.1% and the Nasdaq lost 1.5%.

Discouraging quarterly updates from Target and other retailers put investors in a selling mood, despite a report showing that U.S. retail sales remained strong last month. Target slumped 13.1% after cutting its forecasts for the holiday season following a surprisingly big drop in its third-quarter profits.

All told, the S&P 500 fell 32.94 points to 3,958.79. The Dow slid 39.09 points to 33,553.83. The tech-heavy Nasdaq dropped 174.75 points to 11,183.66.

Smaller company stocks also lost ground. The Russell 2000 index fell 36.04 points, or 1.9%, to 1,853.17.

The latest government report on retail sales for October shows that consumer spending remains strong, though it's unclear whether that's because of more purchases or higher prices.

Strong consumer spending is typically a good sign for the economy, but it could make the Fed's strategy of cooling the economy more difficult.

“The better-than-expected retail sales results don't bolster the case that the Fed" can ease up on its campaign to slow the economy with high interest rates, said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management.

He said resilient consumer spending could improve the possibility that the Fed manages to pull off a so-called “soft landing” with its strategy. That would involve taming inflation without throwing the economy into a recession, or at least avoiding a damaging recession.

Bond yields were mixed. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.69% from 3.78% from late Tuesday. The yield on the two-year Treasury rose to 4.37% from 4.35% from late Tuesday.

Also hanging over market sentiments, especially the energy sector, is the war in Ukraine. Any worsening could cause spikes in prices for oil, gas and other commodities that the region produces.

In energy trading, benchmark U.S. crude lost $1.08 to $84.51 a barrel. U.S. crude oil prices initially rose, before settling 1.5% lower Wednesday. Brent crude, the international standard, fell 92 cents to $91.94 a barrel.

In currency trading, the U.S. dollar inched down to 139.40 Japanese yen from 139.51 yen. The euro cost $1.0381, down from $1.0396.

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AP Business Writers Damian J. Troise and Alex Veiga contributed to this report.

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Yuri Kageyama is on Twitter: https://twitter.com/yurikageyama