[Good Morning Stock Market] "US Fed 'Big Step' Confirmed... KOSPI Expected to Rebound Amid Wait-and-See Sentiment"

US 10-Year Treasury Yield Surpasses 3% Intraday... Reflecting Fed 'Big Step' Concerns
US April Manufacturing PMI Falls Short of Expectations
"Domestic Stock Market Volatility Lower Compared to Other Markets"
IBK Investment & Securities "KOSPI Expected to Rebound and Stabilize on the 3rd"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] On the 3rd, the domestic stock market is expected to remain cautious ahead of the U.S. Federal Reserve's Federal Open Market Committee (FOMC) meeting.

On the 2nd (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,061.50, up 84.29 points (0.26%) from the previous session. The S&P 500, focused on large-cap stocks, rose 23.45 points (0.57%) to 4,155.38, and the tech-heavy Nasdaq index closed at 12,536.02, up 201.38 points (1.63%).

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "The market turned upward supported by a technical rebound from the previous day's sharp drop (Nasdaq -4.2%) and bargain hunting toward the end of trading. Additionally, Warren Buffett's market-friendly remarks at Berkshire Hathaway's shareholder meeting over the weekend were positive for the stock market."

On that day, the U.S. market was also focused on the long-term U.S. Treasury yields and the April Manufacturing Purchasing Managers' Index (PMI). The 10-year U.S. Treasury yield briefly reached 3.01% in the afternoon. This is the first time since December 2018 that the 10-year Treasury yield has surpassed 3%.

The April PMI recorded 55.4, down 1.7 points from the previous month and significantly below the expected 57.6. This is the lowest figure in 19 months. The decline from the previous month and the lower-than-expected figure also led to a reduction in the rise of the 10-year Treasury yield.

On the 27th, when the KOSPI and KOSDAQ indices plunged by over 2%, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. The U.S. stock market sharply declined due to concerns over a slowdown in the economic recession and earnings uncertainty of big tech companies, which appears to have caused a chain reaction. Photo by Moon Honam munonam@

On this day, the domestic stock market is expected to maintain a cautious stance with passive buying inflows. The market is taking the Fed's 'big step' (raising interest rates by 50 basis points at once) as a given. Investors are focusing on whether tightening will continue in June. Seo Jeong-hoon, a researcher at Samsung Securities, advised, "The recent volatility in the domestic stock market is relatively low compared to other markets due to less valuation pressure. In responding to individual stocks, it is necessary to select stocks with high value appeal."

The Investment Strategy Department of IBK Investment & Securities forecasted on the 3rd that "due to risk being priced in early, a rebound and stabilization of the KOSPI is expected." They explained, "It is interpreted that the Fed's hawkish interest rate path has already been reflected in the global stock market, and a significant portion of China risk has already been priced into the market."

Additionally, the IBK Investment & Securities Investment Strategy Department stated that considering the recent market situation, it will be difficult for small and mid-cap stocks to maintain their strength going forward.

As the basis, they pointed out, "The recent outperformance of KOSPI small and mid-cap stocks compared to large-cap stocks was due to institutional investors selling large-cap stocks and actively investing in small and mid-cap stocks with profit momentum. Currently, the buying funds for small and mid-caps are not new investment funds but funds from selling large-cap stocks, so the sustainability is low."