[Good Morning Market] US Dow Jones Index Breaks 40,000 Intraday for the First Time Ever, KOSPI Expected to Start Slightly Lower

The Dow Jones Industrial Average in the U.S. stock market surpassed the 40,000 mark intraday for the first time ever. The domestic stock market is expected to start slightly lower.

[Image source=Reuters News]

On the 16th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 39,869.38, down 38.62 points (0.10%) from the previous trading day. The S&P 500, focused on large-cap stocks, fell 11.05 points (0.21%) to 5,297.10, and the tech-heavy Nasdaq dropped 44.07 points (0.26%) to 16,698.32.

Last night, the Dow appeared to continue its upward momentum from the previous day, even breaking through the 40,000 level intraday for the first time in history, but it reversed and closed lower following remarks from some Federal Reserve Bank presidents. Loretta Mester, President of the Federal Reserve Bank of Cleveland, stated that a restrictive monetary policy stance should be maintained longer and that there would be no rush to cut interest rates. Consequently, the yield on the 2-year U.S. Treasury note rebounded nearly 7 basis points (1bp = 0.01 percentage points) after falling the previous day.

Among individual stocks, Walmart surged 7.0% after reporting first-quarter earnings that exceeded market expectations. Chubb rose 4.7%, reaching a historic high, after it was revealed that Warren Buffett of Berkshire Hathaway purchased shares for two consecutive quarters. Alibaba also gained 7.0% on evaluations that it has the potential to emulate the success of big tech companies like Amazon and Microsoft in China.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.8%, while the Emerging Markets Index ETF rose 0.2%. Eurex KOSPI 200 futures declined 0.4%. Considering this, the KOSPI is expected to start slightly lower today.

For the domestic stock market to break out of its range and achieve further gains, momentum beyond the semiconductor sector will likely be necessary. Kim Seok-hwan, a researcher at Mirae Asset Securities, noted, "The 12-month forward price-to-earnings ratio (PER) of the MSCI Korea Index is 11 times, which is lower than the emerging markets average of 13.1 times." He added, "While it is positive that earnings forecasts are rapidly improving, mainly in semiconductors, expansion into other sectors remains distant."

Han Ji-young, a researcher at Kiwoom Securities, also explained, "Profit-taking selling following yesterday’s sharp rise is expected to appear mainly in large-cap stocks, resulting in a limited market movement. Ultimately, additional earnings improvement momentum is needed for the index to surpass its previous high."

On the same day, the one-month non-deliverable forward (NDF) USD/KRW exchange rate in New York was 1,348 won, reflecting an expected 2 won rise in the USD/KRW exchange rate at the market open.