[Good Morning Stock Market] US Stocks Rise Amid FOMC Watch... "KOSPI Expected to Start Higher"

"Steepest Decline Since the KOSDAQ Dotcom Bubble"
"Fundamental Rebound Close to Structural Improvement Needed"

Image source=Yonhap News

The domestic stock market is expected to start higher on the 1st. However, since the domestic market has recently experienced a significant decline, it is explained that a fundamental rebound rather than a temporary bounce is needed.

On the 31st (local time), the U.S. stock market closed higher across the board as investors watched the Federal Open Market Committee (FOMC). The Dow Jones Industrial Average rose 123.91 points (0.38%) to 33,052.87, the S&P 500 increased by 26.98 points (0.65%) to 4,193.80, and the tech-heavy Nasdaq Composite gained 61.76 points (0.48%) to close at 12,851.24.

The market is focusing on the FOMC regular meeting results, which will be released at 2 p.m. the following day. Although the Federal Reserve (Fed) is expected to keep the benchmark interest rate steady at 5.25?5.5% in this meeting, investors are paying close attention to future moves as the Fed has hinted at one more rate hike within the year.

Additionally, key U.S. indicators such as the October employment report and Purchasing Managers' Index (PMI) will be released. The nonfarm payroll increase, scheduled for release on the 3rd, is expected to be around 170,000 to 180,000, with the unemployment rate forecasted at 3.8%. Since the Fed has argued that below-trend low growth and labor market slowdown are necessary to reduce inflation, there is growing interest in whether signs of employment deceleration will be confirmed.

The U.S. 10-year Treasury yield traded at levels similar to the previous day. The bond market is closely watching the FOMC meeting results and the Treasury Department's borrowing plan by maturity, which will be announced the next day. Since long-term Treasury yields have risen sharply since the third quarter, increasing costs, attention is focused on whether the issuance scale of medium- to long-term bonds will decrease or whether the issuance of long-term bonds will expand to reduce the proportion of short-term bonds.

On the 17th, the KOSPI index is expected to start higher by about 0.2?0.5%. Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Recently, both the KOSPI and KOSDAQ have recorded three consecutive months of decline due to intensified foreign selling and sluggishness in key sectors. In particular, the KOSDAQ index recorded declines of -9.4% in September and -12.5% in October, marking the largest drop since the dot-com bubble in 2001."

He added, "Rather than a temporary rebound due to simple supply and demand improvements, a fundamental rebound closer to structural improvement is needed. However, with significant global macro uncertainties at present, expectations for domestic companies' earnings improvements are not high. Over the past month, earnings estimates for this year and next year have been revised downward by 3.4% and 4.4%, respectively."

Han Ji-young, a researcher at Kiwoom Securities, said, "Due to technical buying following the sharp drop the previous day, easing of Middle East tensions following the partial release of hostages by the Palestinian militant group Hamas, caution ahead of the November FOMC, and domestic supply-demand volatility centered on individual investors, upward and downward factors coexist, resulting in limited price movement. It is expected that the domestic stock market will secure downside rigidity in the index, focusing on key sectors such as semiconductors, automobiles, and secondary batteries, through the overall trend of October Korean exports and individual export performance of these sectors, which will be announced shortly after the market opens."