[Good Morning Stock Market] US Stocks Fall on Powell's Hawkish Remarks and Soaring Oil Prices... "KOSPI Stocks Expected to Lead the Market"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Myunghwan Lee] The U.S. stock market turned downward due to hawkish remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), and a sharp rise in oil prices. On the 21st (local time), the U.S. stock market showed a downward trend due to a surge in international oil prices caused by the possibility of banning imports of Russian crude oil and Powell's indication of interest rate hikes. The Dow Jones Industrial Average and the Standard & Poor's (S&P) 500 index fell by 0.58% and 0.04%, respectively. The Nasdaq index, which is tech-heavy, also dropped 0.40%. However, considering that the Fed's aggressive stance was already reflected in the market the previous day, the KOSPI on the 22nd is expected to start flat and then show a stock-specific market.

Sangyoung Seo, Researcher at Mirae Asset Securities: "Despite Powell's remarks, the decline was limited... KOSPI expected to start flat"

Fed Chair Powell mentioned aggressive monetary policy at the National Association for Business Economics conference, stating, "It is necessary to quickly reverse the monetary policy stance to stabilize prices." He also hinted at the possibility of a 50 basis point hike, saying, "If it is appropriate to act aggressively, such as raising rates by more than 25 basis points, we will do so." Regarding inflation, he expressed concern that "it has worsened significantly even before the Ukraine crisis and has been more persistent than expected." As for policy responses, he referred to the results of the March Federal Open Market Committee (FOMC) meeting and stated, "Scenarios can change rapidly."

On the previous day (the 21st), the Korean stock market fell despite the U.S. stock market rising, as the impact was limited to the futures and options expiration day, and profit-taking selling emerged. The aggressive monetary policy stance of Fed officials had a significant negative impact on foreign investors' supply and demand. Concerns about economic slowdown due to supply chain disruptions also burdened the Korean stock market.

However, it is noteworthy that the decline in the U.S. stock market was limited despite Powell's aggressive remarks. This is because many Fed officials had already mentioned a 50 basis point rate hike, which was somewhat reflected in the market. Considering that the factors causing the U.S. stock market decline, such as the surge in commodity prices and aggressive Fed issues, were partially reflected the previous day, the Korean stock market on the 22nd is expected to start down about 0.3%. Attention will then focus on foreign investors' movements, and a stock-specific market is expected.

Jiyoung Han, Researcher at Kiwoom Securities: "Powell's remarks already reflected... KOSPI expected to show limited movement"

The U.S. stock market closed slightly lower, burdened by Powell's hawkish speech, geopolitical risks from Ukraine, and profit-taking pressure. By sector, energy (3.8%), materials (0.9%), and utilities (0.7%) rose, while consumer discretionary (-0.8%), telecommunications (-0.7%), and real estate (-0.5%) declined. Energy surged due to the sharp rise in oil prices, and the Philadelphia Semiconductor Index fell 0.3%.

Powell's remarks were generally hawkish but did not differ significantly from what was mentioned at the March Federal Open Market Committee (FOMC) meeting. The market had already largely priced in these remarks, which is considered the reason for the reduced decline in the U.S. stock market in the latter part of the session on the 21st. His comments that the oil shock and stagflation issues caused by the Ukraine conflict are limited in likelihood when considering economic fundamentals and domestic crude oil supply and demand also reassured the market.

Like the U.S. stock market, the domestic market on the 22nd is expected to show limited price movement while digesting Powell's hawkish remarks. It appears to have entered a phase of reduced macro sensitivity since the March FOMC meeting, but factors to watch such as the March FOMC minutes, March consumer prices, and the first-quarter earnings season await from next month. The overall index is expected to have limited upside for some time. On the 22nd, differentiated market trends by sector and stock are expected depending on individual factors such as the block deal demand forecast for a large bio company by the Singapore sovereign wealth fund and the resurgence of international oil prices.

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