NEW YORK (REUTERS) – Asian stocks skidded on Thursday (Jan 28) after Wall Street sank amid deepening concerns about stretched valuations in stock markets, while the US dollar and bonds strengthened.

In early Asian trade, Australia’s S&P/ASX 200 benchmark lost 2.22 per cent, Japan’s Nikkei fell 1.97 per cent and South Korea’s Kospi index lost 1.84 per cent. S&P futures pulled back 1 per cent.

Adding to the market worries was the outcome of Federal Reserve’s policy meeting. While the Fed kept settings unchanged as expected, policymakers flagged a concerning slowdown in the pace of the economic recovery.

On Wall Street, the benchmark S&P 500 index fell nearly 2.57 per cent. The Dow Jones Industrial Average fell 2.05 per cent and the Nasdaq Composite dropped 2.61 per cent.

Boeing dragged on the Dow by falling 3.97 per cent on a US$6.5 billion (S$8.65 billion) charge for its delayed 777X jetliner and crash-plagued 737 MAX.

Michael McCarthy, chief market strategist at CMC Markets in Sydney, said the wider stock selloff was surprising, given strong fourth-quarter results from tech giants.

“A little bit of a sell-the-fact response,” McCarthy said, noting stock valuations are at toppy levels. “It might not have everything to do with the Fed.”

Noting there was no urgency in dollar or bond-buying, he said: “Maybe what we need is a good old-fashioned panic” to cool valuations.

The S&P and Dow are down 0.14 per cent and 0.99 per cent, respectively, so far this year.

US Treasury yields remained lower, and the dollar index rose 0.559 per cent, with the euro down 0.07 per cent to US$1.21.

Upbeat US corporate earnings were not enough to pull the benchmarks higher. Microsoft initially rose but erased most of the gains to end up 0.25 per cent.

Facebook shares edged up 0.68 per cent while Tesla fell 2.10 per cent after the close. Apple shares also dipped in extended trade after its results.

These heavyweights have come back into favor as investors dumped economy-linked banks, energy and small-cap stocks.

On the macro level, the Fed’s steady stance shifts the spotlight to how soon and how much fiscal stimulus the US Congress can agree to muster to support the economy.

“The focus is firmly on the fiscal side of the equation now,” Rick Rieder, BlackRock’s chief investment officer of global fixed income, said in a note.

Stimulus checks and extended unemployment insurance have been important to the US recovery and are “far more targeted and effective in combating a crisis…than ‘blunt’ monetary policy tools,” he added.

Though the US vaccination program may help the economy reopen and rebound more fully later this year, for now Fed officials signaled they see it in a deep hole, with high levels of joblessness, ailing small businesses, and a recent surge in COVID-19 infections.

The pan-European STOXX 600 index lost 1.16 per cent and MSCI’s gauge of stocks across the globe shed 2.04 per cent.

The Japanese yen weakened 0.01 per cent versus the greenback at 104.12 per dollar.