[Good Morning Stock Market] "No March Pivot"... "KOSPI Expected to Start Lower"

New York Stock Market Closes Lower Across the Board
US Regional Bank Stocks Plunge...Economic Concerns Rise Again
KOSPI Expected to Show Volatile Trading After Starting Lower

[Image source=Yonhap News]

The Korean stock market is expected to start lower on the 1st. This is because Federal Reserve (Fed) Chair Jerome Powell blocked expectations for a rate cut in March at the January Federal Open Market Committee (FOMC) meeting. As a result, the U.S. stock market fell across the board.

On the 31st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,150.3, down 371.01 points (0.82%) from the previous day. This was the largest drop since December last year. The S&P 500 index fell 79.32 points (1.61%) to 4,845.65, and the Nasdaq index dropped 345.89 points (2.23%) to 15,164.01. The declines in the S&P 500 and Nasdaq were also the largest since September and October of last year, respectively.

The January FOMC unanimously decided to keep the benchmark interest rate steady at 5.25?5.5%. The existing quantitative tightening scale was also maintained. The issue was Chair Powell’s remarks. Contrary to market expectations, he blocked the possibility of a rate cut in March, which is interpreted as the reason for the U.S. stock market closing lower. At the press conference, Powell said, "Based on today’s meeting results, I do not think we will be confident enough to cut rates at the March meeting," dismissing the possibility of a rate cut. He added, "I do not think we will reach a level of confidence that inflation will have fallen to the 2% target by the March meeting."

Along with this, profit-taking desires following new highs in January, concerns over the economy due to the plunge in U.S. regional bank stocks, and cautious sentiment regarding the earnings of the M7 (Magnificent 7 ? the seven tech stocks leading AI) that have driven the U.S. stock market rally also influenced the stock price decline.

The Korean stock market is also expected to show volatility after starting lower. Han Ji-young, a researcher at Kiwoom Securities, said, "A lower start for the KOSPI is expected," but added, "The issues of weak earnings from Alphabet and other M7 stocks and the burden of the January FOMC were partly priced in the domestic market yesterday, so the decline will be limited."

She continued, "During the day, changes in the U.S. futures market and Korea’s January export performance (expected previous month 5.1%) will influence the market, resulting in a volatile trading session."