[MarketING] Market Attention Returns to Interest Rates and Earnings

KOSPI Continues Four-Day Rally
KOSDAQ Declines for the First Time in Six Days

The KOSPI has continued its upward trend for four consecutive days. As concerns over the banking sector have subsided, market attention is expected to focus on whether the U.S. will end its interest rate hike policy and the upcoming Q1 earnings season.

KOSPI Rises for Four Consecutive Days... Recovers to 2470 Level

As of 10:25 a.m. on the 31st, the KOSPI stood at 2474.40, up 21.24 points (0.87%) from the previous day. The KOSDAQ fell 6.44 points (0.76%) to 844.04. The KOSPI expanded its gains and recovered to the 2470 level. The KOSDAQ, which turned downward after six days of gains, showed signs of fatigue from recent rises, starting higher but then turning lower with an expanding decline.

This strong performance is attributed to the easing of banking risks and expectations that the U.S. Federal Reserve (Fed) will end its rate hike policy, which boosted the U.S. stock market. On the 30th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 0.43%, the S&P 500 increased 0.57%, and the Nasdaq climbed 0.73%. Ji-young Han, a researcher at Kiwoom Securities, explained, "Despite weakness in small and mid-sized bank stocks due to the Biden administration's potential for stricter banking regulations, the U.S. stock market closed higher, digesting the disappointing final Q4 GDP figures and less hawkish remarks from key Fed officials compared to before." She added, "Even with the upcoming release of the February Personal Consumption Expenditures (PCE) price index, the market showed strength due to the calming of the banking crisis and expectations of tightening ending."

The economic indicators released the previous day increased expectations that the Fed will end its rate hike policy. The final U.S. Q4 GDP growth rate was revised slightly down to 2.6% quarter-on-quarter from the preliminary 2.7%, falling short of the market consensus of 2.7%. Initial jobless claims also showed weakness, rising to 198,000, exceeding both the previous week's 191,000 and the expected 196,000, indicating a sluggish labor market.

Susan Collins, President of the Boston Federal Reserve Bank, stated, "After implementing some additional tightening this year, rates will be held steady through the end of the year." She added, "The recent banking sector turmoil will contribute to stricter lending standards, economic slowdown, and reduced inflationary pressures, partially offsetting the need for further rate hikes." Thomas Barkin, President of the Richmond Federal Reserve Bank, assessed, "The delayed effects of rate hikes are appearing, and the tightening of credit conditions due to recent banking issues could rapidly reduce inflation."

A thematic market trend is expected to continue. Sang-young Seo, a researcher at Mirae Asset Securities, said, "The U.S. stock market's rise, supported by expectations of the Fed ending its rate hike policy, and the Philadelphia Semiconductor Index's 1.62% increase will continue to drive gains in the domestic market following the previous day." He added, "However, announcements from Fed officials and credit rating agency S&P that U.S. lending is contracting could accelerate the economic slowdown, which is a concern. Historically, thematic trading tends to occur during such periods, so thematic rotation is expected to persist."

Upcoming Earnings Season, Heightened Interest in Results

With expectations of the end of the rate hike cycle, the market is likely to closely monitor the series of economic indicators scheduled for release from today through next week to confirm this.

First, the U.S. February PCE price index, scheduled for release tonight, is expected to show a year-on-year increase of 5.1% (previous month 5.4%) and a core PCE of 4.7% (previous month 4.7%). A researcher commented, "Since the core PCE is expected to fall below the benchmark interest rate level, the current consensus that tightening will stop after a 25 basis point hike in May remains valid."

The U.S. March employment data, to be released next weekend, is also important. The market will likely look to confirm whether wage growth continues to slow following the previous month. Yoo-jun Choi, a researcher at Shinhan Investment Corp., said, "Although nonfarm payrolls exceeded market expectations, hourly wage growth slowed, resulting in mixed February data. Weekly initial jobless claims have remained below 200,000 for three consecutive weeks, indicating continued strength." He added, "There is a high likelihood that the link to easing inflationary pressure will be found in wages, and if the slowdown continues, it will support a moderation in tightening speed."

The earnings season, starting next week with Samsung Electronics on the 7th, is also drawing attention. With both negative and positive factors mixed in the market, no clear direction has emerged, increasing interest in corporate earnings. Young-hwan Kim, a researcher at NH Investment & Securities, explained, "With no clear outlook, the start of the earnings season will likely heighten investor interest in results." He added, "Particularly, attention will focus on Samsung Electronics, as past experience shows semiconductor stocks have performed well during turnaround phases in the semiconductor industry."

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