[Good Morning Stock Market] US Stocks Advance Despite Inflation... Will a Favorable Wind Blow in Korea Too?

US Stock Market Ends Slightly Higher on Expectations of Passing Inflation Peak
Positive Impact on Domestic Market... Increased Optimism for Foreign Investor Inflows

On the 4th (local time), traders are handling their tasks on the trading floor of the New York Stock Exchange (NYSE) in the United States. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Despite the release of high-level inflation data, the U.S. stock market closed slightly higher. Concerns have somewhat eased as the Federal Reserve's (Fed) policy issues, including the possibility of a rate hike in March, have already been priced into the market, shifting the mood toward anticipation of the upcoming earnings season. The domestic stock market is also expected to rise influenced by this trend. However, considering the strong performance the previous day, the extent of the increase is expected to be limited.

On the 12th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 36,290.32, up 0.11% from the previous day. The S&P 500 index rose 0.28% to 4,726.35, and the tech-heavy Nasdaq index increased by 0.23% to 15,188.39.

◆Sangyoung Seo, Researcher at Mirae Asset Securities= The U.S. Consumer Price Index (CPI) for December last year, released that day, rose 7.0% year-on-year, marking the highest level in about 40 years since June 1982. This heightened concerns about persistently high inflation. However, compared to a 0.8% increase month-on-month last month, the rise was limited to 0.5%, showing a gradually improving trend.

The core CPI, which excludes volatile food and energy prices, rose 0.6% month-on-month and 5.5% year-on-year. Housing (up 4.1%) and used cars (up 37.3%) led the increase, with almost all components rising, so concerns about high inflation have not been fully alleviated. However, it is noteworthy that the inflation peak (peak-out) was highlighted as the increase was more limited or slowed compared to the previous month. Following the release of the related data, the U.S. dollar weakened against other currencies, government bond yields fell, and the stock market started higher. Nevertheless, the possibility of prolonged high inflation remains, and the chance of a rate hike in March, as suggested by Federal Reserve Chair Jerome Powell the day before, still exists.

The U.S. stock market's rise amid high inflation, fueled by expectations of a 'peak-out,' is positive for the domestic stock market. The dollar's weakness, with the NDF won-dollar exchange rate recording 1,187 won, continuing the won's strength, is also expected to have a positive impact on foreign investor demand. Additionally, the continued rise in international oil prices and increases in non-ferrous metals including copper have stimulated risk asset appetite, which is favorable.

Considering this, the domestic stock market is expected to continue its strength, focusing on sectors related to commodity markets and stocks with high expectations for earnings improvement ahead of the earnings season. However, given the persistent high inflation and the clear strength of the domestic market the previous day, a process of digesting selling pressure is necessary, so the rise is expected to be limited.

◆Junghoon Seo, Researcher at Samsung Securities= The U.S. inflation data was generally considered within market expectations, and the New York stock market closed with a slight gain. U.S. Treasury yields remained steady, and the dollar index showed a significant decline, falling below the 95-point level. West Texas Intermediate (WTI) crude oil closed near a 2% increase at $82.6.

By sector, materials led with a 0.95% gain in the New York stock market. This was followed by consumer discretionary, IT, and communication sectors showing relative strength, while healthcare was the only sector to decline, falling 0.26%.

High inflation and concerns about early tightening appear to have passed their short-term peak. The domestic stock market is likely to continue a gradual rebound, leaving behind early-year volatility. With the dollar's notable weakness, foreign buying is also expected. It will be necessary to maintain interest in domestic sectors favored by these investors, such as electrical and electronics, automobiles, and materials.