[Good Morning Stock Market] US Employment Exceeds Expectations... KOSPI Expected to Show Volatile Trading Range

"Excessive Expectations for Interest Rate Cuts Also Normalize"
Stay Alert to US Economic Data Releases

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The domestic stock market is expected to show volatility on the 8th. Last week's U.S. employment report exceeded expectations, and with the normalization of interest rate cut expectations, it is assessed that negative factors outweigh positive ones. There were also calls to strengthen risk management while closely monitoring the U.S. economic data scheduled for release this week.

The Dow Jones Industrial Average closed at 37,466.11, up 25.77 points (0.07%) from the previous session on the 5th (U.S. local time) at the New York Stock Exchange (NYSE). The S&P 500 rose 8.56 points (0.18%) to 4,697.24, and the Nasdaq Composite increased 13.77 points (0.09%) to 14,524.07. On a weekly basis, the market showed a decline for the first time in 10 weeks.

With the employment report surpassing expectations, concerns about the Federal Reserve's (Fed) tightening risks were highlighted. Nonfarm payrolls for December rose by 216,000, and average hourly wages increased by 4.1% year-over-year, exceeding market forecasts. The improvement in employment indicators is considered a burden on the stock market as it could increase pressure on rising Treasury yields and strengthen the dollar.

On the other hand, the December U.S. Institute for Supply Management (ISM) Services Purchasing Managers' Index (PMI) slowed down. The December ISM Services PMI was 50.6, below both the consensus estimate of 52.5 and November's 52.7, marking the lowest level in seven months. New orders and employment slowed, while production and cost pressures improved. Concerns grew that the macroeconomic uncertainty felt by companies could lead to business contraction.

The previously excessive expectations for interest rate cuts are calming down. Lee Kyung-min, a researcher at Daishin Securities, explained, "The overly high expectations for rate cuts, to the extent that the possibility of a rate cut was left open at the January Federal Open Market Committee (FOMC) meeting, have begun to normalize. The expectation for a rate cut in January dropped from 17.6% to 6.2%, while the consensus for a rate hold in March rose from 9.77% to 31.9%."

With U.S. economic data releases scheduled this week, domestic stock market volatility is expected to be high. The U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) for December, scheduled for release on the 11th and 12th, are expected to show mixed movements. Since price fluctuations are anticipated to move in opposite directions, bond yields, the dollar, and stock market trends could diverge.

Researcher Lee said, "There could be declines in bonds and the dollar depending on the inflation data results, and even if the stock market rebounds, it will be limited. The impact is expected to be greater as a negative factor than as a positive one, so strengthening risk management is necessary."