[Good Morning Market] US Stocks Take a Breather... KOSPI Also Digesting Sharp Rally

S&P 500 and Nasdaq Slip After Record Highs
Trump-Musk Tensions and Powell's Remarks Weigh on Markets
"Korean Stock Market Also Expected to Undergo a Period of Consolidation"

The US stock market closed mixed, with technology stocks?previously the main drivers of gains?showing weakness. Market participants interpreted this as a period of consolidation following the record highs reached the previous day. Some analysts predict that the Korean stock market, which has also experienced an unprecedented surge, may soon face a "reckoning."

On July 1 (local time), the S&P 500 index closed at 6,198.01, down 0.11% from the previous day on the New York Stock Exchange. The tech-heavy Nasdaq Composite Index also fell 0.82% to finish at 20,202.89. Both indices lost momentum after hitting all-time highs the previous day. In contrast, the Dow Jones Industrial Average rose 0.91% to close at 44,494.94.

These movements appear to be influenced by tensions between US President Donald Trump and Tesla CEO Elon Musk, as well as remarks by Federal Reserve Chairman Jerome Powell.

Tesla, in particular, saw its share price drop by more than 5% compared to the previous day. This decline followed CEO Musk's statement that he would consider forming a new political party if President Trump's tax cut proposal passes, and his comment that he had "a lot to say" about the Department of Government Efficiency (DOGE), where he previously worked. In response, President Trump said he might consider "deporting Musk" and argued that government subsidies for Musk's companies should be reduced, which negatively impacted Tesla's stock price.

Ongoing differences between Trump and representatives of other countries during active tariff and trade negotiations are also seen as dampening additional buying sentiment.

Meanwhile, Chairman Powell attended the Sintra Forum hosted by the European Central Bank (ECB) in Portugal on this day. He stated, "If there were no tariffs, we would have already cut the benchmark interest rate further," adding, "Future decisions will depend on economic indicators." While he did not explicitly mention the possibility of a rate cut in July, he indirectly explained that "the outlook for US inflation has risen significantly overall due to the impact of tariffs."

The Korean stock market is also showing signs of facing a "reckoning" after its unprecedented surge. The previous day, the KOSPI index jumped by about 2% during trading to reach 3,133, setting a new 52-week high, but subsequently gave up much of those gains. However, some analysts suggest this is a process of digesting the sharp rally, as foreign investors turned net buyers for the first time in five sessions. The MSCI Korea ETF, which is closely linked to the domestic market, fell 0.20%, while the Philadelphia Semiconductor Index also declined by 0.70%.

Han Ji-young, a researcher at Kiwoom Securities, said, "Semiconductor-related stocks such as high-bandwidth memory (HBM), as well as shipbuilding, defense, and nuclear power sectors, are all showing simultaneous weakness." However, she added, "The overall upward trend in the domestic market remains intact, and the earnings outlook for leading stocks is still positive. The recent slowdown in momentum appears to be a process of alleviating overheating and concerns about the pace of gains."