[Good Morning Market] U.S. Stocks Take a Breather... Korean Market Also Expected to Slow Down

Three Major U.S. Indices Fall Together for First Time in Two Weeks
Attention on Export Data Improvement... Sector Divergence Continues
Tariff Uncertainty Remains... "Foreign Investors' Return Still to Be Seen"

The three major indices of the New York Stock Exchange fell together for the first time in two weeks. With no new positive catalysts, the market is taking a breather after a series of gains. The domestic stock market is also expected to slow down somewhat.

On May 20 (local time), at the New York Stock Exchange, the Dow Jones Industrial Average closed at 42,677.24, down 0.27% from the previous session. The S&P 500 Index also finished trading at 5,940.46, down 0.39%. The tech-heavy Nasdaq Composite Index closed at 19,142.71, down 0.38% from the previous day. This is the first time since May 6 that all three major U.S. indices closed lower together.

U.S. stocks opened lower as U.S. Treasury yields rose due to weak demand at a Japanese government bond auction. In addition, news that the total amount of bonds issued by European countries surpassed 1 trillion euros at the fastest pace in history led to the 10-year Treasury yield rising above 4.5% again.

In the absence of new upward momentum, selling pressure emerged, particularly in technology stocks, while defensive stocks saw gains, resulting in a differentiated market. Among the so-called "Magnificent 7" big tech stocks, all declined except for Tesla. At the sector level, all sectors fell except for consumer staples, healthcare, and utilities.

With no significant progress in tariff negotiations between the United States and major countries, profit-taking emerged amid concerns about an overheated market.

Meanwhile, key officials from the Federal Reserve once again emphasized price stability in public comments on the same day. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said, "There are still many areas where the impact of tariffs has not yet appeared in the data," and warned, "If preemptive buying, inventory buildup, and other strategies before tariffs are imposed do not prove effective, we will soon see price fluctuations." Alberto Musalem, President of the Federal Reserve Bank of St. Louis, stated, "I believe we must prioritize price stability in the face of persistent inflationary pressures that could shake long-term inflation expectations," adding, "Now is the time to reassure the public that we will continue to fight inflation."

The domestic stock market is expected to remain mixed due to political noise in the United States and caution over rising interest rates in major countries. Depending on the intraday announcement of Korea's May export figures and presidential election policies, there may be movements in individual theme stocks.

The MSCI Korea Index ETF, which is closely linked to the domestic stock market, fell by 0.71%, and the MSCI Emerging Markets ETF also declined by 0.11%. The Philadelphia Semiconductor Index also closed down by 0.14%.

However, there are still expectations for net buying by foreign investors. From August last year to April this year, foreign investors recorded a massive net selling of around 38 trillion won over nine months, but in May they switched to a net buying position of about 1.3 trillion won. Among market participants, there is growing anticipation that after the longest period of "Sell Korea" since the 2008 financial crisis, the market may shift to "Buy Korea."

The strength of net buying is expected to be gradual. Although the downgrade of the U.S. credit rating by Moody's did not cause a major shock, uncertainties remain regarding the aftereffects of tariffs, related economic indicators, and earnings forecasts.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "The recent won-dollar exchange rate falling below the 1,400 won level may provide a short-term arbitrage incentive for foreigners, but this could be part of tariff negotiations between the Korean government and the Donald Trump administration," adding, "If the recent appreciation of the won is not due to improvements in fundamentals but rather an artificial strengthening, it could result in a halt to net buying by foreign investors."