[Good Morning Stock Market] Powell Reiterates Previous Stance... "Domestic Stock Market Expected to Rise 0.3%"

US Stock Market Turns Up Amid Powell's Remarks
"US Commerce Secretary's Visit to China Also Positive"

Image source=Reuters·Yonhap News

The domestic stock market is expected to start higher on the 28th. It is analyzed that the U.S. stock market's turnaround to gains following Federal Reserve (Fed) Chair Jerome Powell's speech at the Jackson Hole meeting will have a positive impact.

On the 25th (local time), the Dow Jones Industrial Average closed at 34,346.90, up 247.48 points (0.73%) from the previous session, the Standard & Poor's (S&P) 500 index ended at 4,405.71, rising 29.40 points (0.67%), and the tech-heavy Nasdaq index finished at 13,590.65, up 126.67 points (0.94%).

In his speech at Jackson Hole, Chair Powell stated that inflation remains at a high level and that the Fed is prepared for additional interest rate hikes. He assessed that to sustainably reduce inflation to the target of 2%, economic growth below trend and a cooling of the overheated labor market are necessary.

He added, "The next rate decision will be based on the data," and "We will evaluate the data to decide whether to tighten further or hold steady." The U.S. stock market initially declined amid expectations of further Fed rate hikes but reversed to gains as analysts noted that Powell's remarks were not significantly different from previous statements. While the possibility of an additional rate hike at the November meeting gained weight, the chance that the Fed may not raise rates further if inflation slows remains.

The assessment that Powell's speech did not differ significantly from previous positions is expected to influence the domestic stock market as well. Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, said, "The Fed officials' less hawkish remarks and comments from Christine Lagarde, President of the European Central Bank (ECB), which expanded gains in the U.S. stock market, are also favorable," but added, "Of course, the increased possibility of further Fed rate hikes, with the probability of a November hike exceeding 50%, is expected to limit the extent of gains." He continued, "Especially since the U.S. stock market's strength is estimated to be a rebound from the previous day's decline, the impact on the domestic stock market is expected to be limited," and "However, the U.S. Commerce Secretary's visit to China from the 27th to 30th of this month raises expectations for easing U.S.-China tensions, which is favorable." Seo added, "Considering this, the domestic stock market is expected to start about 0.3% higher and then proceed with sector differentiation while paying attention to changes in the Chinese stock market."