[Good Morning Market] US Stock Market Highlights Recession Concerns... "KOSPI Expected to Start Lower"

Concerns Over Economic Slowdown as Labor Market Weakness Indicators Released
Focus on March Nonfarm Payroll Data
"Domestic Stock Market Expected to Start Down Around 0.5%"

On the 5th (local time), the U.S. stock market showed mixed results as indicators reflecting a slowdown in the labor market were released. The Dow Jones Industrial Average closed up 80.34 points (0.24%) at 33,482.72. The S&P 500, centered on large-cap stocks, fell 10.22 points (0.25%) to 4,090.38, while the tech-heavy Nasdaq dropped 129.46 points (1.07%) to close at 11,996.86.

Market participants are predicting economic outlooks and the Federal Reserve's (Fed) monetary policy path based on key economic indicators. Automatic Data Processing (ADP) reported that private sector employment increased by 145,000 jobs last month. This is not only more than 100,000 fewer than the previous month's increase but also falls short of the market expectation of 210,000.

[Image source=AP·Yonhap News]

Attention is also focused on the March nonfarm payroll data scheduled to be released this week. Experts expect March nonfarm employment to increase by 238,000, a significant slowdown compared to the 311,000 increase in February. The March unemployment rate is forecasted to remain steady at 3.6%.

With employment indicators expected to slow, recession concerns are gaining traction, supporting expectations that the Fed's rate hikes may soon end. However, voices cautioning that further rate increases cannot be ruled out also exist. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the morning of this day, the federal funds futures market reflects nearly a 55% probability that the Fed will hold rates steady at the May FOMC meeting. The chance of a 0.25 percentage point rate hike stands at 45.2%, down from the previous day.

The domestic stock market on the 6th is expected to open lower. Analysts suggest that the weakness in most U.S. stocks, reflecting recession fears, will weigh on the market. Seosangyoung, Head of Media Content at Mirae Asset Securities, explained, "Particularly, Nvidia showed weakness following Google's announcement that its self-developed chip is more efficient than Nvidia's chip, and the Philadelphia Semiconductor Index fell 1.80%, which burdens related stocks. Additionally, the larger declines in electric vehicle manufacturers and secondary battery sectors compared to other tech stocks will also have an impact."

He continued, "If U.S. consumption decreases and the resulting economic slowdown accelerates, it will negatively affect Korea, which is highly dependent on exports, leading to an overall contraction in investment sentiment. The domestic market is expected to start down about 0.5% and then undergo a process of absorbing selling pressure, with particular attention needed on foreign investors' supply and demand."

Han Jiyoung, a researcher at Kiwoom Securities, said, "Concerns about recession, the weakness in the Philadelphia Semiconductor Index and Nasdaq, and other U.S.-originated negative factors are expected to stimulate profit-taking in stocks that surged the previous day, applying downward pressure. Since foreign investors showed mixed supply and demand patterns yesterday?selling KOSPI spot, buying futures, and buying KOSDAQ spot?it will be crucial to see if similar trading patterns continue."

She added, "Although the U.S. market will be closed on the 7th, attention should be paid to the release of the March nonfarm payroll data. Investors should prepare for the possibility of foreign investors adopting a wait-and-see attitude during the remaining trading days of this week in both U.S. and domestic markets."

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