[Good Morning Stock Market] "Domestic Stock Market Expected to Start Higher Amid Dollar Weakness"

New York Stock Market Rises on Rebound Buying
Domestic Market Expected to Remain Steady Amid Won Strength

The U.S. stock market closed higher as a rebound buying wave flowed in due to an excessive drop. On the 27th (local time), the Dow Jones Industrial Average rose 72.17 points (0.22%) from the previous session to close at 32,889.09, the large-cap focused S&P 500 index increased by 12.20 points (0.31%) to finish at 3,982.24, and the tech-heavy Nasdaq index ended the day up 72.04 points (0.63%) at 11,466.98.

Image source=AP·Yonhap News

The U.S. stock market rose as investors engaged in rebound buying despite a decline in durable goods orders. The U.S. Department of Commerce reported that durable goods orders in January fell 4.5% from the previous month to $272.3 billion, worse than the expert forecast of a 3.6% decrease. However, excluding transportation equipment, January durable goods orders increased by 0.7%, improving from a 0.4% decline in the previous month. The decrease in durable goods orders in January was influenced by a sharp drop in Boeing's commercial aircraft orders after a significant increase last month. Durable goods orders are a leading indicator of manufacturing trends and reflect the real economy as they are linked to factory operating rates, corporate capital investment, and employment.

The 2-year Treasury yield rose to 4.78%, reflecting concerns over prolonged inflation, marking the highest level since 2007. The 10-year Treasury yield climbed to 3.9%. The U.S. bond market showed an upward trend as the possibility increased that the Federal Reserve (Fed) would continue raising benchmark interest rates.

However, housing indicators improved. According to the National Association of Realtors (NAR), the Pending Home Sales Index, which shows homes under contract in January, rose 8.1% from December last year to 82.5. This significantly exceeded the market expectation of a 0.9% increase and marked a second consecutive month of growth.

The domestic stock market is expected to start higher on the 28th. In particular, the weakening of the dollar is expected to influence the domestic market. Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, said, "The news that the UK and the European Union (EU) agreed on a new Brexit agreement related to Northern Ireland led to a strengthening of the euro and pound, which in turn caused the dollar to weaken, positively impacting the stock market." He explained, "Before this news, the euro and pound were weak, but as the talks progressed, they strengthened against the dollar, and ultimately, the U.S. stock market showed strength based on falling Treasury yields and a weaker dollar."

According to major foreign media, UK Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen announced the day before that they had agreed on the 'Windsor Framework,' which modifies the Brexit agreement related to Northern Ireland. This framework lowers trade barriers between mainland UK and Northern Ireland, ensuring free and smooth trade within the UK. Goods moving from mainland UK to Northern Ireland will be exempt from quarantine and customs clearance only if they are marked with a green stripe. Additionally, the UK government will set Northern Ireland's value-added tax (VAT) and subsidies.

To respect the authority of the Northern Ireland Assembly, the agreement includes a clause allowing the Assembly to apply a brake if EU law is applied to Northern Ireland, but the final arbitration authority regarding the agreement remains with the European Court of Justice (ECJ).

Furthermore, Tesla's Investor Day, where a long-term growth plan is expected to be announced, also appears to have positively influenced the domestic secondary battery sector. Seo said, "Ahead of Investor Day, Tesla showed strength amid expectations of increased production, and the secondary battery sector also showed strength due to some positive factors, which is expected to have a positive impact." He added, "With expectations for the artificial intelligence (AI) industry, semiconductor stocks including Nvidia showed strength, and the Philadelphia Semiconductor Index rose 0.55%, which is expected to have a favorable impact on investment sentiment in related sectors."

He continued, "However, the export-import statistics to be announced the next day may show continued export sluggishness, and the Manufacturing Purchasing Managers' Index (PMI) by the Institute for Supply Management (ISM) may remain weak, which could limit the rise of the domestic stock market and pose a burden." He added, "Considering this, the domestic stock market is expected to start with a rise of around 0.3% and maintain a steady performance supported by falling interest rates and a stronger Korean won."

Han Ji-young, a researcher at Kiwoom Securities, said, "Macro uncertainties such as the Fed and inflation are expected to persist until the March Federal Open Market Committee (FOMC), which will be another turning point for the stock market." She added, "Nevertheless, since the recent increase in stock price volatility has largely reflected these existing macro uncertainties, it is appropriate to avoid excessive reduction of stock holdings at this point."

She further said, "The domestic stock market is expected to show a wait-and-see attitude ahead of the holiday the following day, but it is likely to attempt a rebound supported by the strong U.S. stock market and easing of rapid interest rate hikes." She also noted, "The recent sharp rise in the won-dollar exchange rate, which worsened foreign investor demand and put downward pressure on the domestic stock market, is likely to ease due to the weakening of the dollar and discussions by foreign exchange authorities on stabilizing exchange rate supply and demand, which is positive."

However, the researcher warned that preparation is needed for profit-taking in secondary battery stocks that surged due to Tesla's Investor Day. He explained, "Since some related issues were already priced in the secondary battery sector stocks such as EcoPro BM (4.7%) and EcoPro (15.7%) in the domestic stock market the day before, it is necessary to prepare for the possibility of profit-taking after an early rise in the market today."

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