[Good Morning Stock Market] "Nasdaq Declines Widen, Investor Sentiment Weakens... Domestic Market Expected to Start Lower"

[Image source=AP·Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The U.S. stock market closed lower amid concerns that the tightening pace could intensify after employment data showed stronger-than-expected results. On the 5th (local time), the Dow Jones Industrial Average fell 482.78 points (1.40%) to close at 33,947.10, the S&P 500, which focuses on large-cap stocks, ended down 72.86 points (1.79%) at 3,998.84, and the tech-heavy Nasdaq dropped 221.56 points (1.93%) to finish at 11,239.94.

Earlier released November employment data recorded 263,000 new jobs, exceeding market expectations, and the wage growth rate also strengthened to 5.1% compared to the previous month. As a result, the market expects the December interest rate hike to be moderated to 0.50%, but there are concerns that the tightening pace next year could be stronger than anticipated.

The domestic stock market on the 6th is expected to start lower. The expanded decline centered on the Nasdaq is a burden, and the strong dollar and weakened investor sentiment are also likely to drive the decline.

◆ Seo Sang-young, Head of Media Content Division at Mirae Asset Securities = Although still at a high level, supply chain improvements and downward stabilization of inflation are being observed, influenced by improvements in corporate activity indices, imports, and employment. This is presumed to be due to the year-end shopping season. Especially considering the improvement in consumption-related trends, these indicator results have driven dollar strength and interest rate increases.

Additionally, labor demand remains strong, so wage increases may continue for several months, but due to the Federal Reserve’s (Fed) policy and the expected economic slowdown in 2023, the labor market is anticipated to cool down.

Furthermore, it is important to note that Amazon’s decline is continuing. As the Fed’s rate hike stance persists, economic slowdown is spreading, and companies are accelerating cost-cutting efforts. These cost reductions have ultimately raised concerns about potential sales declines for software companies such as Microsoft, Salesforce, and Intuit. Reports that Tesla’s Shanghai factory production in December will decrease by 20% month-on-month due to weak demand also add to the burden. Credit rating agency Fitch has argued that as the fight against inflation intensifies, global growth forecasts are being revised downward again, further fueling concerns about economic slowdown.

The news of corporate cost-cutting due to economic slowdown and the weakness in individual sectors such as software, which led to an expanded decline in the Nasdaq, are expected to negatively impact the domestic stock market on this day. The strong dollar and rising interest rates have also dampened overall investor sentiment, contributing to the decline. However, the increased expectations for Chinese economic improvement due to China’s zero-COVID policy and the continued downward stabilization of inflation are positive factors. Considering these points, the domestic stock market is expected to start with a decline of around 1%, followed by a rebound buying wave.

◆ Han Ji-young, Researcher at Kiwoom Securities = Considering the severe stair-step decline the domestic stock market has experienced this year, the recent rebound itself is a natural phenomenon. However, during the roughly two-month rebound process, no new positive factors have emerged, and existing positive factors such as the pace adjustment of tightening have been quickly reflected in stock prices, which is seen as a short-term burden. Although the nature of the released indicators is the same, the market appears to be creating reasons for position liquidation, causing stock market volatility. At the same time, as the Fed has entered a blackout period during which Fed officials are prohibited from speaking, it is necessary to prepare for the possibility of continued confusion among market participants regarding the Fed’s thoughts and policy changes for the time being.

The sudden appearance of technical selling, the sharp drop in the U.S. stock market, and the rise in the won-dollar exchange rate are expected to act as burdens on the domestic stock market. Since stock prices have surged sharply in a short period, it is appropriate to prepare for the possibility of selling pressure due to profit-taking. Also, as this is still a period of high sensitivity to central bank policy changes, the overall flow of the domestic financial market, including the stock market, is expected to vary depending on the interest rate decision by the Reserve Bank of Australia scheduled during the trading session.

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