[Good Morning Stock Market] Disappointing Powell... Plunging US Stock Market

[Asia Economy Reporter Hwang Junho] The U.S. stock market plunged sharply on the 4th (local time) after being disappointed by remarks from Jerome Powell, chairman of the Federal Reserve (Fed), the central bank of the United States. Although economic indicators were positive, Powell's comments dampened market enthusiasm. Experts expressed concerns about the potential impact on South Korea's stock market as well.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 30,924.14, down 345.95 points (1.11%) from the previous session. The Standard & Poor's (S&P) 500 index fell 51.25 points (1.34%) to 3,768.47, and the tech-heavy Nasdaq index plunged 274.28 points (2.11%) to close at 12,723.47.

The market showed an upward trend following disappointing employment data released before the opening. There was a sense of easing in inflation expectations. However, Powell's single remark quickly cooled the market's enthusiasm.

At a conference hosted by the Wall Street Journal, a U.S. economic media outlet, he referred to the U.S. 10-year Treasury yield, which had surged to the 1.6% range last week, as "noteworthy," and stated, "Asset purchases will continue at the current level until we make considerable progress toward our goals." He also emphasized, "There are inflationary pressures, but they are temporary. We will be patient."

This statement was interpreted as the Fed tolerating recent inflation. Consequently, the U.S. 10-year Treasury yield quickly soared to the 1.54% range, and downward pressure on the U.S. stock market intensified, leading to a sharp decline.

Lee Kyung-min, a strategic researcher at Daishin Securities, diagnosed, "While caution is needed in the short term, strategically, the opportunity to increase weighting has come closer." He added, "Looking at the market trend, the previously trapped global stock markets are breaking through the bottom. The Nasdaq had already dropped two days ago, and a level down occurred yesterday. Our domestic stock market held up well until yesterday, but we are watching to see if it can hold out today as well."

Han Dae-hoon, a strategic researcher at SK Securities, said, "Powell's attempt to soothe the market has failed again," and predicted, "The phase of increased volatility will continue for the time being." He further analyzed, "We are entering a phase where sector and stock selection become important. Among cyclical stocks, it is becoming crucial to make differentiated choices focusing on sectors and stocks supported by solid earnings."

Ahn Jae-gyun, a researcher at Korea Investment & Securities, forecasted, "Following Powell's remarks the previous day, interest rates rose further and the stock market's decline widened, suggesting that Fed monitoring may strengthen. It seems effective to confirm issues sufficiently until the Federal Open Market Committee (FOMC) meeting on the 18th and then explore opportunities for bargain buying."