[Good Morning Stock Market] US Stocks Show 'Stock-Specific Market'... Korean Stocks Expected to Differentiate Mainly in 'Contact' Sector

Reflecting Expectations for Economic Normalization... Continue Monitoring Consumer-Related Stocks
Stock Differentiation Expected Amid Sideways Market for the Time Being

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The U.S. stock market closed slightly higher, driven by gains in stocks related to economic normalization. In the domestic market, a differentiated market trend is expected, with strength centered on 'contact' related companies.

On the 2nd (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,600.38, up 0.07% from the previous day. The S&P 500 index rose 0.14% to 4,208.12, and the tech-heavy Nasdaq index also gained 0.14%, closing at 13,756.33.

◆Sangyoung Seo, Researcher at Mirae Asset Securities=Last year, 'untact' (non-face-to-face) related companies surged amid the COVID-19 situation, but now, with the expansion of vaccinations, attention is shifting to the earnings improvement of so-called 'contact' related companies, leading to strength centered on companies related to economic normalization. Additionally, as countries expanding vaccinations such as the U.S. and Europe experience strong economic recovery, industrial goods are also continuing their strength. Nevertheless, the stock market is showing a sideways trend rather than rising, with a stock-specific market unfolding. In particular, inflation, economic normalization, tapering (reduction of asset purchases), and meme stocks are being highlighted day by day.

Economic normalization is ultimately a phenomenon arising from the expansion of vaccinations. Expectations for explosive demand growth are rising, and government liquidity supply expectations remain, resulting in clear strength in consumer-related stocks. This is the background for the strength in cyclical stocks and the card industry. Going forward, in the U.S. stock market, attention should be paid to theme stocks under the topic of 'sustainability,' regardless of untact or contact, as well as consumer goods and banks with clear earnings growth, and infrastructure-related stocks.

There are two factors causing some hesitation in the latter part of the session. One is the tapering debate, and the other is the sharp volatility of meme stocks. On this day, news that members of the U.S. Federal Reserve (Fed), especially Patrick Harker, President of the Philadelphia Fed with a moderate stance, stated that "discussions on tapering may need to start soon" led to some selling. Additionally, as funds flowed into so-called meme stocks, AMC Entertainment surged 130%. Such speculative trading movements caused some selling pressure centered on certain individual stocks. In fact, as AMC Entertainment surged, the three major indices including Nasdaq turned downward during the session.

In the domestic market, a differentiated market trend is expected with strength centered on contact-related companies. The downward stabilization of expected inflation in the U.S. and the Fed's Beige Book report stating that the U.S. economy is growing somewhat faster than before are also positive factors. This could expand risk asset preference sentiment. Of course, the Fed noted that inflationary pressures have increased but mentioned this period as 'a few months,' which also alleviates related concerns. Furthermore, attention is expected on China's Caixin Services PMI released on this day, with a market trend showing strength centered on companies related to economic normalization.

◆Jiyoung Han, Researcher at Kiwoom Securities=The domestic stock market is expected to show a stagnant price trend as it enters a consolidation phase influenced by cautious sentiment toward U.S. employment data. The fact that the market gave back gains after attempting to break the previous high the day before suggests that most market participants' confidence has not yet fully recovered. Since there are many materials to be confirmed and passed through, such as employment data, inflation, and the Federal Open Market Committee (FOMC) until mid-month, periods where the market shows no clear direction during the session may frequently appear. However, since expectations for economic normalization remain valid, sector rotation is expected to continue.

From a supply and demand perspective, foreign investors have shifted from selling to net buying since the end of last month. Recently, the market direction has tended to change according to the intraday trading patterns of foreign investors rather than individuals or institutions, so attention should be paid to changes in foreign investor supply and demand during the session.