[Good Morning Stock Market] Powell's 'Hawkish' Remarks Weigh on US Stocks... KOSPI Expected to Open Down 1%

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), hinted at a 'big step' (a 0.5 percentage point increase in the benchmark interest rate) this month and made hawkish remarks, causing the U.S. stock market to close lower overnight. The KOSPI is also expected to start down about 1%.

On the 7th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,856.46, down 574.98 points (1.72%) from the previous session. The Standard & Poor's (S&P) 500 index fell 62.05 points (1.53%) to 3,986.37, and the Nasdaq index dropped 145.41 points (1.25%) to 11,530.33.

Jerome Powell, Chairman of the U.S. Federal Reserve
[Photo by Yonhap News]

The broad decline in the U.S. stock market was due to Powell’s remarks during his appearance before the Senate Banking Committee that day. Powell stated, "Recent economic indicators have come in stronger than expected, suggesting that the terminal rate may be higher than previously anticipated," and added, "If the overall data indicate that faster tightening is appropriate, we are prepared to raise rates at a quicker pace." This was interpreted as a strong indication of a possible 'big step' at the Federal Open Market Committee (FOMC) regular meeting scheduled for the 21st-22nd, sharply worsening investor sentiment.

Additionally, just before the market closed, Qin Gang, China’s Foreign Minister, said at a local press conference, "The U.S. is escalating tensions with China," and warned, "If the U.S. does not change its course, there will be 'conflict and confrontation,'" further deepening the market decline.

As a result, the yield on the U.S. 2-year Treasury note rose more than 11 basis points (bp), surpassing 5%. This is the first time since 2007 that the 2-year yield has reached the 5% level.

The KOSPI is also expected to open down about 1% today. Seo Sang-young, Head of Media Content at Mirae Asset Securities, said, "The decline in the U.S. stock market due to Powell’s strong hawkish remarks is a burden on the Korean stock market," adding, "In particular, the clear strength of the U.S. dollar increases the possibility of won weakness, which is expected to weigh on foreign investor demand." However, he noted, "Powell emphasized that the data results until the March FOMC meeting are important and that the January economic indicators may have been influenced by mild weather, suggesting that the continuity may not be significant," and added, "While the Korean stock market is expected to start lower, it is likely to be limited to a process of digesting some profit-taking."

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