[Good Morning Market] US Stocks Plunge Over 2%... KOSPI Expected to Start Down 0.8~1.2%

[Asia Economy Reporter Son Seon-hee] Overnight, the U.S. stock market experienced a sharp decline of over 2% as investor sentiment weakened due to concerns over additional tightening by the Federal Reserve (Fed). Geopolitical tensions surrounding the Russia-Ukraine war escalated, causing U.S. Treasury yields to soar. On the 22nd, the KOSPI is expected to open down by approximately 0.8 to 1.2%.

On the 21st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,129.59, down 697.10 points (2.06%) from the previous session. The Standard & Poor's (S&P) 500 index fell 81.75 points (2.00%) to 3,997.34, and the Nasdaq index dropped 294.97 points (2.50%) to 11,492.30.

New York Stock Exchange (Photo by Yonhap News)

The reasons behind the weak U.S. stock market are multifaceted. The minutes of the Federal Open Market Committee (FOMC) meeting held from January 31 to February 1 are scheduled to be released the following day, and there is caution that the minutes will reflect a hawkish stance. This is supported by recent statements from Fed officials endorsing a "big step" (a 0.5 percentage point increase in the benchmark interest rate) and stronger-than-expected economic indicators such as employment and inflation.

In particular, U.S. Treasury yields hit their highest levels since November last year, further dampening investor sentiment. The yield on the 2-year U.S. Treasury note rose more than 10 basis points (bp) to 4.74%, while the 10-year Treasury yield climbed over 13 bp to 3.96%.

Disappointing earnings forecasts for this year from major large retailers such as Walmart and Home Depot also contributed to the market's decline. Most of the 11 sectors comprising the S&P 500 were unable to avoid losses.

On the same day, the Korean stock market is also expected to open lower by about 0.8 to 1.2%. Despite the rise in U.S. Treasury yields, the dollar index showed a relatively firm trend, suggesting that there will not be a sudden outflow of foreign capital. However, with the won-dollar exchange rate expected to start about 8 won higher, foreign capital inflows are likely to be limited.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The domestic stock market is expected to see increased profit-taking due to the correction in the U.S. stock market. Particularly, selling pressure may emerge around secondary battery, construction, petrochemical, and steel sectors, which have recently seen significant gains." He added, "One characteristic of recent foreign capital inflows is that they have been more focused on futures and program trading rather than spot trading, so profit-taking is also expected to occur mainly in large-cap stocks that make up the KOSPI 200."

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