[Good Morning Stock Market] Watching Powell's Remarks... KOSPI Expected to Fall 0.3%

[Asia Economy Reporter Kwangho Lee] On the 7th, the domestic stock market is expected to start lower. There is a strong cautious mood ahead of the corporate earnings announcements and remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), scheduled for this week.

On the 6th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,891.02, down 34.99 points (0.1%) from the previous session. The Standard & Poor's (S&P) 500 index fell 25.4 points (0.61%) to 4,111.08, and the Nasdaq index dropped 119.5 points (1%) to close at 11,887.45.

The KOSPI is expected to open down 0.3%. The strong U.S. employment data has caused the won-dollar exchange rate to rise sharply for two consecutive days, likely increasing foreign investors' desire to realize profits. Foreign investors, who had shown net buying in the domestic stock market since the beginning of the year, have recently started some profit-taking as the dollar and government bond yields rose amid concerns that the U.S. Fed's hawkish stance may continue. The market is expected to follow a similar trend on the 7th.

Since the February U.S. employment data surprise, there has been a gradual shift in views among market participants, policymakers, and major institutions regarding the U.S. economy and Fed policy outlook. In this process, the current market appears to have entered a cautious phase.

While the ISM Manufacturing PMI indicates a contraction in the manufacturing sector, the service sector is stronger than expected. The robust employment situation in this sector seems to be bringing a positive change to the U.S. growth outlook, which had been assumed to be in recession for some time.

The fact that the slowdown in economic momentum may be less severe than previously expected is positive, as it could slow the downward revision of earnings forecasts not only for the Korean stock market but also for major global markets. On the 7th, the lingering effects of the employment surprise and the rise in the won-dollar exchange rate are expected to stimulate short-term profit-taking by foreign investors following the January rally, leading to a weak start, with overall index gains likely to be limited throughout the day.

From an industry and theme perspective, Tesla showed strength on news that it would receive tax benefits under the Inflation Reduction Act (IRA), and Google's decision to launch its own GPT, Bard AI, within days is expected to improve investor sentiment for domestic Tesla-related secondary battery stocks and GPT-themed stocks.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, “With major companies such as SK Innovation, Krafton, and Kakao Pay scheduled to announce earnings, the domestic stock market will continue to see sector- and stock-specific rallies despite macro downside pressures.”