[Good Morning Market] New York Stocks Close Lower... KOSPI Expected to Open Weak

The KOSPI, which surpassed the 3,700 mark and set an all-time high the previous day, is expected to open lower on October 17. This is due to the weakness in the U.S. stock market overnight, which was affected by concerns over bad loans at U.S. regional banks.

Lee Sunghoon, a researcher at Kiwoom Securities, stated, "The domestic stock market has recently entered a short-term overbought zone amid a rally, and we expect a weak opening as the market reflects the correction in the U.S. stock market caused by concerns over credit risk."

On the 16th, the KOSPI index and others are displayed on the status board of Hana Bank dealing room in Jung-gu, Seoul. Photo by Yonhap News

He added, "It is positive that even previously neglected sectors such as automobiles and secondary batteries are seeking a rebound. Considering the buying trend led by foreign investors and abundant liquidity conditions, as evidenced by record-high client deposits, sectors with less valuation pressure are likely to be less sensitive to declines."

The previous day, the domestic stock market closed higher, led by large-cap stocks, amid expectations for a resolution to the Korea-U.S. tariff negotiations and optimism over expansion in the artificial intelligence (AI) industry. In particular, the KOSPI closed at 3,748.37, bringing the 4,000 mark within sight.

Lee explained, "For the remainder of October, major events are lined up, including earnings releases from key big tech companies, the U.S. Consumer Price Index (CPI) announcement on the 24th, and the Federal Open Market Committee (FOMC) meeting on the 30th. Given the recent prolonged government shutdown and potential credit risk concerns, market participants should be mindful of increased caution ahead of these major events."

On the 16th (local time), the three major U.S. stock indexes closed lower as issues with bad loans at regional banks continued to emerge.

On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 45,952.24, down 301.07 points (0.65%) from the previous session. The S&P 500 Index fell 41.99 points (0.63%) to 6,629.07, while the Nasdaq Composite Index dropped 107.54 points (0.47%) to 22,562.54.

In early trading, strong earnings from TSMC boosted investor sentiment. TSMC announced that its net profit for the third quarter reached 452.3 billion New Taiwan dollars (about 21 trillion won), setting a new record high.

However, in the afternoon, as bad loan issues at regional banks surfaced, investor sentiment quickly cooled and stock indexes plunged. The Nasdaq index, which had risen as much as 0.96% during the session, expanded its loss to as much as 1.17%.

Zions Bancorporation announced that its subsidiary, California Bank & Trust, had written off 50 million dollars in commercial and industrial loans as accounting losses. Another regional bank, Western Alliance Bancorporation (WAB), also reported that it was unable to exercise its senior lien on Cantor Group.

Fears over the health of regional banks were further fueled by comments from Jamie Dimon, Chairman of JPMorgan Chase. During the third-quarter earnings announcement, he referenced the recent bankruptcy of auto loan company Tricolor, warning, "If you see one cockroach, there are probably more," and urged everyone to be vigilant in advance.