[Good Morning Stock Market] Awaiting Powell's Remarks... Limited Stock Price Movement Expected

[Image source=Yonhap News]

The U.S. stock market closed lower as profit-taking emerged in early trading ahead of remarks by Federal Reserve (Fed) Chair Jerome Powell. In particular, the energy and some semiconductor sectors showed weakness, reacting sensitively to stock-specific issues. Additionally, concerns over China's economic instability led to a preference for safe-haven assets, resulting in a stronger dollar, stronger yen, and rising bond prices, which added pressure. However, the narrowing of losses in the late session due to strength in individual stocks such as Tesla and Nvidia was also a notable feature.

Accordingly, on the 20th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,053.87, down 0.72% (245.25 points) from the previous session. The Standard & Poor's (S&P) 500 index fell 0.47% (20.88 points) to 4,388.71, and the Nasdaq index closed at 13,667.29, down 0.16% (22.28 points) from the previous session.

Among individual stocks, Tesla (5.34%) rose after Rivian (5.51%) announced that it would be able to use Tesla's charging network starting next year. Nvidia (2.61%) continued its upward trend following a report by McKinsey on the 14th forecasting that generative AI could create up to $4.4 trillion in value for the global economy. Alibaba (-4.53%) declined as selling pressure emerged following the announcement of its CEO's resignation.

The U.S. stock market initially widened losses due to increased profit-taking but narrowed losses in the late session, which is expected to have a positive impact on the Korean stock market. However, the narrowing of losses was mainly due to concentration on individual stock issues such as Tesla and Nvidia, while most stocks showed weakness, which remains a concern. Furthermore, the expectation that Fed Chair Powell will make hawkish remarks reaffirming a 50 basis point rate hike path at the House Financial Services Committee hearing, similar to the last Federal Open Market Committee (FOMC) meeting, is also a burden.

Seo Sang-young, Head of Media Content at Mirae Asset Securities: “Korea Expected to Start Down Around 0.5%”

[Image source=EPA Yonhap News]

Today, the Korean stock market is expected to start down around 0.5%, followed by a process of digesting selling pressure ahead of Fed Chair Powell's remarks.

Yesterday, the Korean stock market declined due to profit-taking selling pressure. In particular, foreign investors sold both spot and futures, which acted as a supply-demand burden. Although the People's Bank of China effectively cut the Loan Prime Rate (LPR), the benchmark interest rate, during the session, this was anticipated and interpreted as a sign of economic slowdown, adding to concerns. Additionally, Alibaba's weakness following CEO replacement news led to a wider decline in the Hong Kong market, contributing to weakened investor sentiment in Asia. However, thanks to active buying by individual investors, the losses narrowed, with the KOSPI down 0.18% and the KOSDAQ down 0.25%.

Meanwhile, the U.S. stock market initially widened losses due to increased profit-taking but narrowed losses in the late session, which is expected to positively influence the Korean stock market. However, the narrowing of losses was mainly due to concentration on individual stock issues such as Tesla and Nvidia, while most stocks showed weakness, which remains a concern. Notably, despite Nvidia's strength, the Philadelphia Semiconductor Index fell 0.70%, a relatively large decline that raises the possibility of profit-taking in related stocks.

Furthermore, the expectation that Fed Chair Powell will mention reaffirming a 50 basis point rate hike path at the House Financial Services Committee hearing, similar to the last FOMC meeting, is also a burden. In particular, it is anticipated that he will make hawkish remarks emphasizing that the June rate pause does not mean the end of the rate hike cycle.

Meanwhile, in the U.S. financial market, although the stock market narrowed losses, it still declined; the dollar and yen strengthened, and government bond prices rose, indicating an increased preference for safe-haven assets, which is also a burden.

Han Ji-young, Researcher at Kiwoom Securities: “Increased Cautious Sentiment Ahead of Powell’s Remarks... Limited Stock Price Movement”

Yesterday, the Korean stock market closed slightly lower, influenced by the Chinese market due to disappointment over the strength of China's stimulus measures amid continuous profit-taking selling pressure.

Today, ahead of Fed Chair Powell's remarks, cautious sentiment is expected to prevail, with limited stock price movement due to weakness in the U.S. stock market, including the Philadelphia Semiconductor Index.

From a sector perspective, FedEx (-0.8%), the largest logistics company in the U.S., announced weak guidance and is showing a decline of over 3% in after-hours trading, which is expected to constrain investment sentiment in domestic cyclical stocks. On the other hand, Rivian (5.5%) showed strength after announcing it would use Tesla's (5.3%) electric vehicle charging stations, which is expected to improve supply-demand conditions for domestic stocks related to electric vehicle charging infrastructure, such as chargers and charging management systems, today.