TOKYO (AP) — Asian shares mostly fell Friday, discouraged by a Wall Street slump that followed a blowout profit report from Nvidia and mixed reports on the United States economy.

Japan’s benchmark Nikkei 225 dropped 2.0% to 31,634.37 in afternoon trading. Australia’s S&P/ASX 200 dipped 0.9% to 7,118.20. South Korea’s Kospi lost 0.8% to 2,516.63. Hong Kong’s Hang Seng slipped 0.5% to 18,126.36, while the Shanghai Composite shed less than 0.1% to 3,081.14.

Tokyo inflation eased to 2.9% in August from the previous year, largely because of lower energy prices, according to government data. The consumer price index, excluding fresh food prices, rose 2.8% from the previous year, the gains easing for the first time in two months.

Although inflationary pressures appear to be gradually fading in Japan amid stabilizing energy prices, the indicator for prices is still above the Bank of Japan’s target of 2%.

High on regional investors’ minds is the speech by U.S. Federal Reserve Chair Jerome Powell, scheduled for later in the day. He’ll be speaking at an event in Jackson Hole, Wyoming, that has been the site of major policy announcements by the Fed.

On Wall Street, the S&P 500 dropped 1.3% for its worst loss in three weeks. That nearly wiped out its gain for the week, which had been a bright spot in what’s been a rough August.

The Dow Jones Industrial Average dropped 1.1% and the Nasdaq composite tumbled 1.9%.

Stocks sank as Treasury yields stabilized following their tumble a day earlier. High yields in the bond market have been upping the pressure because they make investors less willing to pay high prices for stocks and other risky investments. They may be set to go even higher, depending on what the head of the Federal Reserve says.

The yield on the 10-year Treasury rose to 4.23% from 4.20% late Wednesday. It fell there from 4.33% a day before, close to its highest level since 2007.

Yields found some traction following mixed reports on the U.S. economy. One showed fewer U.S. workers applied for unemployment benefits last week. Another said orders for long-lasting manufactured goods slumped by more last month than economists expected.

For now, weaker-than-expected reports on the economy may be more welcome in financial markets. The economy has managed to avoid a long-predicted recession, but the fear is that it’s so solid that it will keep upward pressure on inflation.

The Federal Reserve has already raised its main interest rate to the highest level since 2001 in hopes of grinding down high inflation. High rates work to do that by slowing the entire economy and hurting prices for investments.

Hope had built that the Fed’s latest rate hike in July would prove to be the last of this cycle, after inflation cooled considerably since peaking above 9% last summer. Traders also have made bets for the Fed to begin cutting rates in early 2024. But a series of stronger-than-expected reports on the economy has diminished those hopes.

The two-year Treasury yield, which moves closely with expectations for the Fed, rose to 5.01%. A day before, it had dropped to 4.98% from 5.05% after a report suggested U.S. business activity is cooling in August.

That weaker-than-expected report pushed John Vail, chief global strategist at Nikko Asset Management, to think Powell may not sound as aggressive about keeping rates high.

But he still says Powell “will likely express concerns about inflation not falling fast enough and that the market should not expect any cuts through at least the first part of 2024.”

Thursday’s weakness for stocks came despite a much stronger-than-expected profit report from Nvidia, one of Wall Street’s most influential stocks. That raised hopes that this year’s frenzy on Wall Street around artificial intelligence technology isn’t just hype.

Nvidia first stunned the market three months ago when it said the quick adoption of AI would send its revenue soaring in the three months through July. Its sales came in even better than forecast, at $12.51 billion, and the company gave a forecast for the current quarter that again blew past Wall Street’s expectations.

All told, the S&P 500 fell 59.70 points to 4,376.31. The Dow dropped 373.56 to 34,099.42, and the Nasdaq sank 257.06 to 13,463.97.

In energy trading, benchmark U.S. crude rose 27 cents to $79.32 a barrel. Brent crude, the international standard, added 25 cents to $83.61 a barrel.

In currency trading, the U.S. dollar edged up to 146.12 Japanese yen from 145.81 yen. The euro cost $1.0792, down from $1.0819.

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AP Business Writer Stan Choe contributed from New York.