[Good Morning Stock Market] Powell Who 'Missed'... Strong Dollar and Electric Vehicle Tax Credit Risk Bad News

Expectations for Bargain Buying in Korean Stock Market
But Limited Upside for Index
US Considers Ending Electric Vehicle Tax Credit
Korean Exchange Rate Designated as 'Monitoring Country'

Jerome Powell, Chairman of the Federal Reserve (Fed)

On the 15th, the Korean stock market is expected to start weak. This is because U.S. stocks all fell after Federal Reserve (Fed) Chair Jerome Powell made hawkish remarks saying there is "no need to rush rate cuts." Meanwhile, the won-dollar exchange rate remains in the 1400 won range, which is expected to dampen investor sentiment toward the domestic stock market.

On the 14th (local time), the Dow Jones Industrial Average closed at 43,750.86, down 207.33 points (0.47%) from the previous trading day in the New York stock market. The S&P 500 index fell 36.21 points (0.6%) to 5,949.17, and the Nasdaq index dropped 123.07 points (0.64%) to 19,107.65.

The U.S. stock market was influenced by Powell’s remarks suggesting a slowdown in monetary policy pace. At an event in Dallas, he said, "The U.S. economy is by far the best among major economies worldwide," and added, "The economy is not sending any signals that we need to rush rate cuts."

This is interpreted as indicating that there is no need to hasten rate cuts given that the U.S. October Consumer Price Index (CPI) met expectations and labor indicators remain robust.

Yonhap News

The U.S. Department of Labor reported that weekly initial jobless claims decreased by 4,000 to 217,000. This figure was below the consensus estimate of 223,000. The less volatile 4-week moving average of jobless claims fell by about 6,000 to 221,000 compared to the previous week.

The U.S. Producer Price Index (PPI) for October rose 0.2% month-over-month on a seasonally adjusted basis. This exceeded the revised previous month’s figure of 0.1% but was in line with consensus expectations. Year-over-year, it increased by 2.4%, surpassing both the previous month’s 1.9% and the consensus of 2.3%. The robust U.S. economy and concerns over a resurgence in inflation are acting as upward factors for market interest rates. Currently, the 10-year U.S. Treasury yield remains around 4.4%.

Meanwhile, concerns are reflected that the combination of policies such as tax cuts and tariffs since Donald Trump’s election could trigger future inflation. Reports have emerged that Trump’s transition team plans to repeal the tax credit of up to $7,500 per electric vehicle purchase under the Inflation Reduction Act (IRA). As a result, electric vehicle manufacturers like Tesla (-5.7%) and Rivian (-14.3%) plunged in the U.S. stock market.

Yonhap News

The exchange rate is also a problem. Despite verbal interventions by authorities, the won-dollar exchange rate has remained in the 1400 won range for three consecutive trading days. Early this morning, the U.S. Treasury Department designated South Korea as a currency "monitoring country" again after one year.

Today, the Korean stock market is expected to rebound as bargain hunting emerges, but the upside is likely to be limited. Seonghun Lee, a researcher at Kiwoom Securities, said, "I expect bargain buying to flow in early in the session due to perceptions of excessive declines like yesterday," but added, "Factors such as potential forced selling volumes during the session, sluggish stock market trading volume, and the absence of a rebound trigger for Samsung Electronics will limit the upside."

By sector, volatility in secondary battery companies’ stock prices is inevitable due to the electric vehicle tax credit repeal news. However, expectations for growth in artificial intelligence (AI) are expected to continue. Researcher Lee assessed, "Following the rise of ASML (2.90%) and Nvidia (0.34%) yesterday, domestic AI-related stocks are also expected to rebound, and Trump-beneficiary sectors such as shipbuilding, defense, and aerospace are likely to show favorable trends."