[Good Morning Market] Korean Stock Market Reopens After Holiday... Volatility 'Up'

The U.S. stock market closed lower ahead of the Federal Open Market Committee (FOMC) results. On May 7, the Korean stock market is expected to show high volatility, partly due to the impact of a two-day market closure.

AFP Yonhap News

On May 6 (local time), at the New York Stock Exchange, the Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 40,829, down 389.83 points (0.95%) from the previous trading day. The S&P 500 Index, which tracks large-cap stocks, fell by 43.47 points (0.77%) to 5,606.91, while the tech-heavy Nasdaq Index dropped by 154.58 points (0.87%) to 17,689.66.

There was no significant progress in tariff negotiations. Scott Besant, U.S. Treasury Secretary, appeared before the House Appropriations Committee and stated that the United States is currently conducting trade negotiations with 17 out of 18 major trading partners, excluding China. He added, "As early as this week, we may announce trade agreements with some of our largest trading partners."

Lee Kyungmin, a researcher at Daishin Securities, said, "Last weekend, the U.S. stock market showed gains of around 1% on expectations for trade negotiations and strong employment data." However, he explained, "The gains were limited due to caution ahead of the FOMC and ongoing trade negotiation issues."

Investors are waiting for the Federal Reserve's decision. In particular, they are focusing less on the direction of the benchmark interest rate itself, and more on the remarks that Jerome Powell, Chair of the Federal Reserve, will make at the press conference scheduled immediately after the FOMC meeting.

The market expected the Fed to keep interest rates unchanged at this month's FOMC regular meeting. According to CME FedWatch, the interest rate futures market predicted with a 96.8% probability that the Fed would maintain the rate at 4.25-4.5% per annum this month.

The domestic stock market is expected to experience high volatility. Han Jiyoung, a researcher at Kiwoom Securities, said, "The weak trend in the U.S. stock market during the holiday period is likely to be reflected all at once in the domestic market at the opening, increasing price volatility from the start of trading."

By sector, pharmaceutical-related stocks should be watched closely. U.S. President Donald Trump recently announced that he would soon unveil tariffs on specific pharmaceutical products.

Kim Jiwon, a researcher at KB Securities, also said, "We expect a wait-and-see approach as the market pays attention to Powell's comments on the timing of future rate cuts and the impact of tariffs." He added, "Trump's announcement of pharmaceutical tariffs will inevitably affect related stocks, and with the early presidential election approaching, investors should also be aware of the potential for increased volatility in political theme stocks."