[Good Morning Stock Market] "FOMC Result D-1... KOSPI Expected Mixed Trend Amid Upward Momentum"

Market Participants Assume Fed's 'Big Step (50bp Hike)'
Bond Market Preempts June 'Giant Step (75bp Hike)'
AMD Posts Strong 1Q Results...Shares Surge After Hours
Domestic Stock Market Expected to Rise...Limited Gains Anticipated
Focus on Samsung Electronics and Domestic Semiconductor Stocks' Trends

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] On the 4th, the domestic stock market is expected to experience high volatility during the session ahead of the Federal Open Market Committee (FOMC) regular meeting results to be released early morning on the 5th. Although buying momentum is expected to drive an upward trend, cautious sentiment is likely to limit the extent of the gains.

On the 3rd (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,128.79, up 67.29 points (0.20%) from the previous session. The S&P 500, centered on large-cap stocks, rose 20.10 points (0.48%) to 4,175.48, and the tech-heavy Nasdaq index closed at 12,563.76, up 27.74 points (0.22%).

US Major Index Fluctuation Rates (Photo by Samsung Securities)

◆ Seo Sang-young, Head of Media Content Division, Mirae Asset Securities = On this day, the U.S. stock market started mixed and flat ahead of the FOMC. Notably, travel stocks underperformed due to released corporate earnings, while the energy sector showed strength. The financial sector also showed strength following upgrades in investment ratings, highlighting sector differentiation.

The aggressive rate hikes by the Federal Reserve and concerns over growth slowdown due to the prolonged Ukraine war resurfaced, leading to profit-taking that gave back earlier gains, which was also notable.

The increased volatility in the U.S. stock market ahead of the FOMC without a clear direction poses a burden on the Korean stock market. This is because concerns have risen that the Federal Reserve may announce aggressive monetary policies, such as a 75 basis point rate hike in June following a 50 basis point hike in May.

However, it is worth noting that semiconductor and software sectors, which had seen significant declines due to concerns over the Fed's aggressive monetary policy, showed resilience and led the U.S. market's gains. In particular, U.S. Treasury yields have already priced in the Fed's 75 basis point rate hike in June, meaning many negative factors are already reflected in the financial markets, potentially limiting the impact of the actual announcement.

Of course, uncertainty remains high, and while the Korean stock market is expected to see some rebound buying ahead of the FOMC, the extent of this is likely to be limited.

◆ Han Ji-young, Researcher at Kiwoom Securities = Currently, the U.S. stock market is stabilizing as buying interest has increased following perceptions of oversold conditions after the late April crash. However, market participants still lack confidence that this will lead to a meaningful trend reversal. Not only at the overall market level but also the recovery of big tech and high-valuation growth stocks, which have led the U.S. market since the COVID-19 pandemic, remains weak, hindering confidence recovery.

Ultimately, to escape the phase of lost confidence, the key issue is how the market will overcome the 'Fed tightening acceleration,' one of the macro factors that caused adjustments. There are two ways to resolve this negative factor: either the Fed slows down the pace of tightening, or the market adjusts stock prices and valuations to internally absorb the negative impact.

Currently, the market appears to be internally overcoming the negative factors and accepting rate hikes. To see a meaningful rebound, two indicators must be monitored: the FOMC results scheduled for the 5th and the April inflation data due on the 11th.

AMD Q1 Earnings (Photo by Investing.com)

Since the market expects a 'big step,' the May FOMC will be a critical turning point regarding whether the Fed changes its monetary policy stance and its position on inflation.

Considering this, the domestic stock market is expected to show an upward trend, supported by the stabilization of the U.S. market's sell-off and the positive effects of the first-quarter earnings season, which has progressed well into the mid-stage.

Additionally, after the U.S. market close, AMD (+1.4%) reported strong earnings and raised guidance, leading to a more than 6% surge in after-hours trading, which is expected to contribute to improving investor sentiment in semiconductor stocks that recently faced concerns over weak front-end demand.

However, since the Korean stock market will be closed on the 5th and the FOMC event is scheduled for early morning on the 5th, it is judged that cautious sentiment among market participants, especially foreign investors, during the session may limit the upside of the index.

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