Will the US Relief Rally Continue Next Week?

On the 11th, dealers are working in the dealing room of Hana Bank in Euljiro, Seoul. The KOSPI index opened at 2586.52, down 10.04 points (0.39%) from the previous trading day. The won-dollar exchange rate opened at 1277.7 won, up 1.3 won. Photo by Moon Honam munonam@

[Asia Economy Reporter Hwang Junho] As the factors increasing downward pressure on the stock market are gradually being absorbed by the market, there is a forecast that a relief rally will continue next week.

Park Hee-chan, a researcher at Mirae Asset Securities, stated in his weekly outlook on the 29th, "If it is confirmed that the pace of global economic slowdown is not high, we can expect technology stocks to lead the market."

This week, several signals that could compensate for the previous sluggishness were detected in the market. First, the U.S. Federal Reserve (Fed), which has begun normalizing monetary policy to combat inflation, has confirmed its stance that there will be a 50bp base rate hike by July and no giant step (a 50bp hike at once).

With improved earnings from retailers such as Best Buy and Macy’s, concerns about consumer contraction, which had been highlighted due to deteriorating earnings from Walmart and Target, have decreased. The investment sentiment contraction seen during the downward revision of Snap’s earnings forecast seems to have already been absorbed by the market, as the market’s reaction to the downward revision of Nvidia’s earnings forecast was muted.

Researcher Park evaluated, "The sell-off phenomenon in technology stocks can also be seen as having passed a critical point."

However, he explained, "The fact that IT technology stocks did not lead the rebound situation likely reflects concerns about a stagflationary environment," adding, "For the relief rally to be maintained, conditions such as the pace of U.S. and global economic slowdown not being high and continued confirmation of inflation peak-out signs are necessary."

Accordingly, he suggested that it is necessary to observe the intensity of economic slowdown through the upcoming U.S. ISM manufacturing and services indices, and to monitor the speed of wage increase control through the May employment data. The current market expects a mild economic slowdown and a peak-out in wage growth.