[Good Morning Market] Nasdaq Strengthens... KOSPI Expected to Start Up 0.5%

[Asia Economy Reporter Son Sun-hee] Overnight, the U.S. stock market surged significantly, buoyed by Federal Reserve (Fed) Chair Jerome Powell's mention of the term 'disinflation' (a decline in the inflation rate). This remark was interpreted as a sign that the end of interest rate hikes is near, leading to strength centered on large technology stocks. The KOSPI is also expected to start with an increase of around 0.5% on the 3rd.

On the 2nd (local time) at the New York Stock Exchange (NYSE), the Nasdaq index closed at 12,200.82, up 3.25% (384.50 points) from the previous session. The Standard & Poor's (S&P) 500 index rose 1.47% (60.55 points) to 4,179.76, while the Dow Jones Industrial Average fell 0.11% (39.02 points) to 34,053.94.

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed) [Image source=Yonhap News]

The day before, the Fed took a 'baby step' by raising the benchmark interest rate by 0.25 percentage points as expected by the market. This marked a return to a normal level from the unprecedented pace of tightening seen last year. Although the possibility of further hikes remains open, Chair Powell mentioned 'disinflation' 15 times during the press conference, signaling that the end of rate hikes is near. Market participants evaluated Powell's remarks as 'better than expected.'

Additionally, the absence of an energy crisis, which had escalated mainly in Europe in the fourth quarter, also contributed positively to investor sentiment and served as a favorable factor supporting the stock market's strength.

In the U.S. stock market, continuous net buying centered on large technology stocks sensitive to interest rates led the Nasdaq to post a 3.25% gain. Meta Platforms, which recently announced earnings, surged 23.3% after revealing cost efficiencies and a large-scale share buyback. This broadly improved investor sentiment, driving strength led by major tech stocks such as Amazon (+7.4%), Alphabet (+7.3%), Microsoft (+4.7%), and Apple (+3.7%).

This also had a positive impact on the domestic stock market, with the KOSPI expected to start with an increase of around 0.5%. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "Our stock market is expected to continue to see positive inflows mainly from foreign investors, supported by improvements in global financial conditions. In particular, the Nasdaq Composite Index has risen more than 17% since the beginning of the year, recording the highest year-to-date return in nearly 50 years since 1975."

However, the domestic consumer price index for January, announced the day before, rose 5.2% year-on-year, expanding the increase, which is likely to weigh on the stock market. Especially, the rise in public utility charges, which has been intensifying since the beginning of the year, raises concerns about further inflation and could significantly dampen consumer sentiment.

Researcher Kim said, "Following Meta Platforms' surprise results yesterday, large tech companies such as Apple, Amazon, and Alphabet are expected to report earnings below market expectations after today's market close, showing a 3-5% decline in after-hours trading. This is a limiting factor for today's stock market rise," adding, "Attention will be focused on the earnings calls of these companies during the day, and volatility and differentiated movements by stock are expected throughout the trading session."