[Good Morning Stock Market] "Rebound Expected After Sharp Drop"... KOSPI Expected to Start Up 0.7%

Expecting a Rebound Due to Sharp Sell-Off
Growth Stocks Lead Strong Recovery in US Market

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The domestic stock market is expected to start higher on the 5th. Analysts believe this is a rebound following the sharp decline in the previous trading day.

On the 4th (local time), the U.S. stock market closed higher as Treasury yields fell due to weaker-than-expected private employment data. The Dow Jones Industrial Average rose 127.17 points (0.39%) to close at 33,129.55, the large-cap S&P 500 index gained 34.30 points (0.81%) to finish at 4,263.75, and the tech-heavy Nasdaq index increased 176.54 points (1.35%) to close at 13,236.01.

According to ADP, private sector employment in the U.S. increased by 89,000 in September, falling short of the expected 150,000. This figure is significantly slower compared to the 180,000 increase in August. As the ADP employment data missed expectations, the 10-year U.S. Treasury yield, which had surpassed 4.8% the previous day, declined. The 2-year yield, sensitive to monetary policy, dropped to around 5.05%, and the 30-year yield fell to about 4.86%. Both the 10-year and 30-year yields had reached their highest levels since 2007 the day before.

Market attention is focused on the September employment report to be released on the 6th. The Federal Reserve (Fed) believes that to achieve its 2% inflation target, below-trend low growth and a cooling labor market overheating are necessary. If employment data continue to exceed expectations strongly, concerns about tightening monetary policy are expected to intensify. The market forecasts that nonfarm payrolls for September slowed to 163,000 compared to the previous month.

On the 5th, the KOSPI is expected to open about 0.7% to 1.0% higher as bargain buying emerges. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The domestic stock market fell sharply the previous day due to rising U.S. long-term bond yields and worsening foreign and institutional demand," adding, "However, a rebound following the sharp drop is expected today." He further explained, "Additionally, influenced by strength in the electric vehicle sector including Tesla and Lithium Americas, bargain buying is expected to flow into the secondary battery sector, which had recently experienced significant declines."

Han Ji-young, a researcher at Kiwoom Securities, said, "Amid perceptions that the previous day's sharp decline was excessive, the easing of crude oil and bond yield surges, the decline in the offshore won-dollar exchange rate, and the strength of the U.S. stock market led by big tech and growth stocks such as Tesla, Nvidia, and MS are expected to support a rebound."