[Good Morning Stock Market] S&P 500 Hits All-Time High...Reviving Investor Sentiment

Rising Expectations for Passage of Infrastructure Investment Bill by Joe Biden's US Administration
Supply Chain Disruptions Occurred, but Major Developed Countries Have High Vaccination Rates

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Gong Byung-sun] The U.S. stock market's S&P 500 index is showing signs of revived investor sentiment, hitting record highs. This is interpreted as strength in individual sectors and stocks ahead of the U.S. Congress's vote on the infrastructure investment bill and the decision on whether to implement tapering of asset purchases.

On the 21st (local time), the New York stock market showed mixed results. At the New York Stock Exchange, the Dow Jones Industrial Average closed at 35,603.08, down 0.02% (6.26 points) from the previous trading day. It appeared to pause slightly after reaching a record high the day before. Meanwhile, the S&P 500 index rose for the seventh consecutive trading day, closing at an all-time high of 4,549.78, up 0.30% (13.59 points) from the previous close. The Nasdaq, which is tech-heavy, closed at 15,215.70, up 0.62% (94.02 points) from the previous day.

◆ Seo Sang-young, Researcher at Mirae Asset Securities = Overall, the market showed limited changes, with fluctuations driven by individual stocks. The Dow was weak as IBM plunged 9.56% after its earnings announcement. However, the Nasdaq rose, buoyed by strength in some stocks like Tesla.

While the energy sector was weak due to falling international oil prices, consumer discretionary showed strength ahead of the year-end shopping season, supported by solid earnings from some individual stocks. Ultimately, the U.S. stock market is experiencing a sector- and stock-specific market ahead of major events such as the upcoming congressional vote on the infrastructure investment bill and the Federal Open Market Committee (FOMC) meeting on November 3, where tapering is expected to be announced.

Meanwhile, infrastructure investment issues continue. On the previous day, Senator Joe Manchin of the Democratic Party reportedly blocked the Biden administration's infrastructure investment plan by mentioning a possible party switch. However, Manchin later made positive remarks about the social spending bill, raising expectations for its passage. This can be seen as easing downward pressure on the overall U.S. stock market.

(Provided by Hana Financial Investment)

◆ Jeon Gyu-yeon, Researcher at Hana Financial Investment = China's recently announced third-quarter economic growth rate was 4.9% year-on-year, slightly below the expected 5.0%. Lockdowns in various regions within China led to weak retail sales, and a weakening real estate sector slowed fixed asset investment, which negatively impacted growth.

Supply chain disruptions and power shortages also limited production. China's September National Bureau of Statistics Manufacturing Purchasing Managers' Index (PMI) was 49.6 points, entering contraction territory for the first time in 19 months. Although external demand supports the lower bound of China's economy, there are many factors constraining fundamentals, such as supply chain issues and weak domestic demand.

Next week, the third-quarter gross domestic product (GDP) figures for the U.S., Eurozone, and South Korea will be released. In the third quarter, the global surge in new COVID-19 cases caused widespread supply chain disruptions. However, vaccination rates in major advanced countries are already high, and the declaration of "With Corona," meaning a phased return to normal life, indicates an economic normalization trend. It is necessary to gauge the extent of economic damage caused by the resurgence of COVID-19 and to assess the pace of economic recovery through the third-quarter growth rates.

(Provided by Hana Financial Investment)

Economic momentum is better in Europe than in the U.S. The U.S. economy's service sector recovery was sluggish due to the COVID-19 Delta variant. Additionally, the aftermath of hurricanes and supply chain disruptions likely limited manufacturing and mining production, causing weakness. Therefore, the U.S. third-quarter GDP is expected to be around a 3.0% annualized rate from the previous quarter. However, from November, foreign entry restrictions into the U.S. will be lifted, and the year-end consumption season is approaching.

The Eurozone's third-quarter GDP is expected to be around 3.4% year-on-year. The Eurozone has a high vaccination rate, which has somewhat limited the spread of COVID-19. Many countries declared "With Corona" early on. In particular, the introduction of vaccine passport systems has revitalized tourism, helping the service sector recover. Although the recent energy supply crisis in Europe could pose a risk, the Eurozone's economic momentum is expected to continue.