[Good Morning Stock Market] New York Stocks Fall Across the Board... KOSPI Expected to Start Weak

On the 3rd (local time), the U.S. New York stock market closed lower across the board as the expectation spread that the pace of interest rate cuts would not be as steep as the market had anticipated. Due to the weak U.S. stock market and uncertainty over the timing of U.S. interest rate cuts, the domestic stock market is also expected to start off weak.

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On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 37,430.19, down 284.85 points (0.76%) from the previous session. The large-cap S&P 500 index ended the day at 4,704.81, down 38.02 points (0.8%), while the tech-heavy Nasdaq index closed at 14,592.21, falling 173.73 points (1.18%).

Among the S&P 500 sectors, all eight sectors except energy, utilities, and telecommunications declined. Real estate stocks fell more than 2%, while consumer discretionary, technology, industrials, and materials stocks also dropped over 1%. Apple, which plunged over 3% following Barclays’ downgrade the previous day, closed slightly lower again. Tesla fell more than 4%, and major semiconductor stocks such as Nvidia, Intel, AMD, and Qualcomm all declined between 1% and 2%. On the other hand, energy stocks like Chevron rose as international oil prices surged.

The sharp market decline was due to the December Federal Open Market Committee (FOMC) minutes released early in the morning, which did not contain specific details regarding discussions on interest rate cuts. Although most members expected rate cuts this year, they expressed unusually high levels of uncertainty and took a cautious stance. As a result, disappointment spread in the market that rate cuts would not be as extensive as expected, leading to the stock market downturn.

Park Gwangnam, a researcher at Mirae Asset Securities, analyzed, "As uncertainty about the interest rate path increased, including lowered expectations for early rate cuts, the market ultimately widened losses and closed lower."

According to the U.S. Department of Labor’s Job Openings and Labor Turnover Survey (JOLTs) report released that morning, job openings in November last year were 8.79 million, down 60,000 from the revised previous month. This is the lowest level in two years and eight months since March 2021 but aligns with Wall Street expectations. The December ISM Manufacturing Index was 47.7, slightly above both the previous month’s 46.7 and the forecast of 47.1, but still indicated a contraction phase.

Regarding this, Park said, "A notable feature was the 97,000 decrease in leisure and hospitality job openings. However, considering that last month’s figure was revised upward by 119,000, the impact on the market is limited."

International oil prices surged more than 3% for both West Texas Intermediate (WTI) and Brent crude due to geopolitical concerns stemming from protests in Libya, partial production cuts at the Sahara oil field, and a bomb attack in Iran. The U.S. dollar strengthened amid increased interest rate volatility and weakness in the Japanese yen.

Due to uncertainty over the timing of interest rate cuts and the weak U.S. stock market, the domestic stock market is expected to face a neutral to below-neutral environment today.

Han Ji-young, a researcher at Kiwoom Securities, predicted, "Although the perception that the previous day’s over 2% plunge in the KOSPI was excessive will persist today, following the FOMC minutes release, uncertainty over the timing of rate cuts and the weak U.S. stock market will create a neutral to below-neutral market environment. In terms of sectors, domestic growth stocks are expected to see weakened investor sentiment due to the weakness in U.S. growth stocks such as Tesla and Nvidia."

Accordingly, advice was given that an investment strategy focusing on earnings growth is necessary. Researcher Han said, "In periods like recently, when interest rate volatility expands and macro uncertainties such as Federal Reserve policy uncertainty rise again, a strategy focusing on earnings growth is essential."