[Good Morning Stock Market] US Stocks Fall Amid Caution... "KOSPI Expected to Start Flat"

Decline Amid Cautious Sentiment Ahead of Key Indicator Release
US Treasury Yield Curve Inversion Widens to Yearly High
Domestic Stock Market Falls Previous Day, Focus on Individual Stock Trends

On the 27th, the domestic stock market is expected to start in a narrow range.

[Image source=Reuters Yonhap News]

On the 26th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 39,069.23, down 62.30 points (0.16%) from the previous session. The S&P 500 index fell 19.27 points (0.38%) to 5,069.53, and the Nasdaq index closed down 20.57 points (0.13%) at 15,976.25.

On that day, the U.S. stock market declined amid increased caution ahead of major events scheduled for this week. Seokhwan Kim, a researcher at Mirae Asset Securities, said, "The S&P and Dow indices saw profit-taking for two consecutive days after hitting record highs last week," adding, "Caution grew ahead of key economic indicators and corporate earnings announcements, including January's Personal Consumption Expenditures (PCE) inflation, fourth-quarter Gross Domestic Product (GDP), and February's Manufacturing Purchasing Managers' Index (PMI)." The U.S. 2023 fourth-quarter GDP will be released on the 28th, January PCE inflation on the 29th, and the February Institute for Supply Management (ISM) Manufacturing PMI on March 1.

Looking at individual stocks, among the "Magnificent 7" (Apple, Amazon, Alphabet, Microsoft, Meta, Nvidia, Tesla), Tesla recorded the largest gain of 3.87%. Electric vehicle-related stocks were strong. Chinese electric vehicle company Li Auto surged 19% after reporting fourth-quarter sales more than doubled year-on-year and profits exceeded market expectations. Along with Li Auto, Chinese EV "big three" Xiaopeng (6.8%) and Nio (4.6%) also rose. On the other hand, Alphabet fell 4.50%, likely due to the suspension of its generative AI, Gemini's image generation feature, following some inaccurate historical depictions. Market cap leader Microsoft (-0.68%) and second-ranked Apple (-0.74%) declined slightly, while third-ranked Nvidia rose 0.35%. Walmart, which had its first trading day after deciding on a 3-for-1 stock split for the first time in 25 years, rose 1.8%.

The yield curve inversion between short- and long-term U.S. Treasury bonds, considered a leading indicator of recession, reached its widest level of the year. This inversion occurs when the yield on the short-term 2-year bond is higher than that of the long-term 10-year bond. The yield spread between the 2-year and 10-year bonds was -44 basis points (1bp = 0.01 percentage points). According to a 2018 report by the Federal Reserve Bank of San Francisco, since 1955, yield curve inversions between the 2-year and 10-year bonds have preceded recessions by 6 to 24 months, with only one false signal.

The previous day, the domestic stock market closed at 2,647.08, down 0.77% from the previous trading day, as profit-taking surged following the announcement of the "Corporate Value-Up Program." Researcher Kim said, "The KOSPI is expected to start in a narrow range today," adding, "However, it is necessary to pay attention to the possibility of some rebound buying following the previous day's decline and the flow of KOSDAQ secondary battery stocks driven by the strength of electric vehicle stocks such as Tesla and Li Auto."