[Good Morning Stock Market] US Stocks Fall Amid Stagflation Concerns... KOSPI Expected to Start Higher

The U.S. stock market declined due to concerns over stagflation (rising prices amid economic slowdown). However, the Korean stock market is expected to start higher on the 26th. This is because investor sentiment is anticipated to remain stable following positive earnings announcements from Microsoft and Alphabet after the market close.

[Image source=Reuters Yonhap News]

On the 25th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,085.8, down 375.12 points (0.98%) from the previous trading day. The S&P 500, focused on large-cap stocks, fell 23.21 points (0.46%) to 5,048.42, while the tech-heavy Nasdaq dropped 100.99 points (0.64%) to 15,611.76.

According to the U.S. Bureau of Economic Analysis (BEA), the preliminary real Gross Domestic Product (GDP) growth rate for the first quarter of this year was 1.6% quarter-on-quarter (annualized). This marked a significant slowdown compared to the revised 3.9% growth in the fourth quarter of last year and fell short of expert forecasts. The slowdown in consumer and government spending growth weighed on GDP growth. Consumer spending, which accounts for two-thirds of the U.S. economy, increased by 2.5% in the first quarter, below the market expectation of 3%.

On the other hand, inflation showed strong signs. The core Personal Consumption Expenditures (PCE) price index, excluding food and energy, rose 3.7% in the first quarter, exceeding the expected 3.4%. Inflation in the services sector, excluding housing and energy, increased by 5.1%, doubling the rate from the previous quarter.

Seokhwan Kim, a researcher at Mirae Asset Securities, said, "The U.S. stock market faced downward pressure as the stagflation debate added uncertainty to the Federal Reserve's policy path," adding, "Concerns over inflation pushed U.S. Treasury yields to their highest levels in six months."

Jiwon Kim, a researcher at Kiwoom Securities, stated, "Disappointing growth results and persistent inflationary pressures have fueled stagflation concerns beyond fears of delayed rate cuts."

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.4%, while the Emerging Markets Index ETF rose 0.2%. Eurex KOSPI 200 futures declined 0.5%. Considering this, the KOSPI is expected to start higher.

Researcher Seokhwan Kim explained, "The ‘volatile market’ continues depending on foreign demand and sector-specific issues, with rising government bond yields in major global countries centered on the U.S. being a burden," but added, "Investor sentiment is expected to remain stable due to positive earnings announcements from Microsoft and Alphabet after the market close."