Local shares went back in the red yesterday following a tepid lead from Wall Street as traders prepare for the release of key US inflation data and start of earnings season.

The benchmark Philippine Stock Exchange index (PSEi) closed at 6,546.11, down by 72.41 points or 1.09 percent., while the broader All Shares index slipped to 3,469.64, down by 34.04 points or 0.97 percent.

Unicapital Securities said the PSEi is poised to test the 6,600 levels after taking profits, which may get a boost after economic officials signaled a potential 100-basis-point rate cut in 2024.

Total value turnover reached P11.6 billion. Market breadth was negative 129 to 59, while 37 issues were unchanged.

Other Asian markets also resumed the losses that have characterized the year so far. A nervousness has swept through trading floors in the past week as investors grow concerned that they may have been too hasty at the end of 2023 in pricing in a series of Federal Reserve interest rate cuts this year.

The bank said at its December meeting that it saw three reductions over the next 12 months but a string of data showing inflation tumbling and the economy slowing saw markets factor twice as many - sending stocks soaring.

But the release last week of minutes from that meeting, and a forecast-beating jobs report forced dealers to re-evaluate their positions.

Analysts said consumer price index data this week will be crucial to how markets perform in the near term, with a miss on the upside seen fuelling another sell-off.

Traders had ended last year optimistic that the Fed would cut rates for the first time in March but bets on that have fallen on swaps markets, while some analysts are now predicting the first to come in June.

Also coming up is the beginning of US earnings season later in the month, which could provide some idea about how companies are faring in the high-rate environment.

'Attention gradually shifts to the upcoming earnings season to gain insights into companies' growth trajectories,' said Stephen Innes at SPI Asset Management.

'Investors are keen to discern whether recent declines are justified or whether companies' profits remain robust enough to revive the end-of-year rally.'

The S and P 500 and Dow ended lower, though the Nasdaq eked out a small gain, with sentiment also dampened by the World Bank decision to cut its 2024 global growth outlook, due in part to weaker activity in the United States and China.

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