[Good Morning Stock Market] US Stock Market Starts Higher on Positive News of Fed Rate Hike Opposition

[Asia Economy Reporters Seon-ae Lee and Myunghwan Lee] Due to the strong rebound in the U.S. stock market during the Lunar New Year holiday, the domestic stock market is expected to start higher on the 3rd. However, since there are factors limiting the rise, the rebound momentum is expected to fall short of expectations and show differentiation by sector.

The New York stock market showed strength influenced by Google's sharp rise. On the 2nd (local time) at the New York Stock Exchange, the Dow Jones Industrial Average, which gathers blue-chip stocks, closed at 35,629.33, up 0.63% from the previous trading day. The Standard & Poor's (S&P) 500 Index, centered on large-cap stocks, ended at 4,589.38, up 0.94%. The tech-heavy Nasdaq Index recorded 14,417.55, up 0.50%. All three major indices rose for four consecutive trading days.

Despite the private sector employment data released ahead of the U.S. Labor Department's January employment report showing weaker-than-expected results, the stock prices were not affected. According to the ADP National Employment Report, private sector employment in January decreased by 301,000 compared to the previous month, falling far short of the 200,000 increase expected by experts surveyed by The Wall Street Journal (WSJ). The December figure was revised downward from an increase of 807,000 to 776,000. In January's private employment, the service sector decreased by 274,000 and the manufacturing sector by 27,000, indicating that the spread of Omicron significantly impacted employment in the service sector.

Concerns about rapid tightening have somewhat subsided. Patrick Harker, President of the Philadelphia Federal Reserve Bank, said in an interview with Bloomberg the day before, "I will support a 0.25 percentage point rate hike in March this year," drawing a line against the 0.50 percentage point hike speculation. James Bullard, President of the St. Louis Federal Reserve Bank, known as a hawkish member of the Federal Reserve (Fed), told Reuters, "I do not think a 0.50 percentage point hike would be helpful at this time."

However, the geopolitical risk caused by the Ukraine situation is increasingly becoming a variable. John Kirby, spokesperson for the U.S. Department of Defense, said at a briefing that "troops will be additionally deployed to Romania, Poland, and Germany." The newly deployed troops total about 3,000. This is the first time the U.S. has directly deployed troops to Eastern Europe amid confrontation with Russia.

◆ Kiwoom Securities Researcher Kim Seheon = On this day, the domestic stock market is expected to start with a significant rise influenced by the U.S. stock market. The recent volatility in the U.S. stock market has expanded the perception of a bottom. The strong performance of Apple, a major factor in the U.S. stock market's rise on the 28th of last month, has already been reflected in the Korean stock market, but the strong earnings of semiconductor and tech stocks such as NXP Semiconductor, Alphabet, and AMD announced during the Lunar New Year holiday are expected to positively affect the domestic stock market.

It is also positive that the remarks of Federal Reserve officials during the holiday period all showed a stance similar to that of Fed Chair Jerome Powell at the Federal Open Market Committee (FOMC) press conference. Although there were statements from Fed officials during the Lunar New Year holiday supporting a rate hike in March, leaving open the possibility of a 50 basis point increase, and gradual guidance on balance sheet reduction, the U.S. stock market was not significantly affected.

However, there are factors that will limit the rise after the sharp increase in the domestic stock market today. ▲ The rebound speed has slowed after the sharp rise on the 28th and 29th ▲ Profit-taking pressure has increased due to the rapid rebound ▲ Most of the earnings of large tech stocks such as Apple and Alphabet have been completed, while the market reacted negatively to poor earnings from manufacturing companies such as GM and Starbucks. Considering this, the rebound momentum is expected to vary by sector in the domestic stock market depending on earnings forecasts.

◆ Mirae Asset Securities Researcher Seo Sangyoung = The U.S. stock market surged during the Lunar New Year holiday after Atlanta Fed President Bostic and St. Louis Fed President Bullard opposed a 50 basis point rate hike in March, with the Nasdaq rising 7.3%. After this Fed movement, the market reacted sensitively to earnings announcements and started higher but turned down as the Ukraine issue became prominent.

Alphabet reported solid earnings despite advertising revenue being lower than expected, with other segments greatly improved. Additionally, the announcement of a 20:1 stock split positively influenced investor sentiment, causing a sharp rise. Meta, which announced earnings after the market close, plunged 22% due to poor earnings and a decline in active users. AMD surged after raising its guidance for this year based on solid earnings.

The sharp rise in the U.S. stock market due to Fed officials opposing a March rate hike is positive for the Korean stock market. In particular, the semiconductor sector and other tech stocks, which led the decline, are expected to drive strength in related stocks in the domestic market based on earnings. Geopolitical risks such as slowing export growth and the U.S. troop deployment to Eastern Europe are burdensome factors. However, stability in the foreign exchange and bond markets is expected to have a positive impact on foreign investor demand, leading the KOSPI to start with a significant rise and surpass 2,700 points.

This content was produced with the assistance of AI translation services.