[Good Morning Stock Market] Profit-taking leads to US market giving up gains... KOSPI expected to start lower

S&P 500 Hits Highest Closing Level Since August Last Year
Profit-Taking Selling Puts Pressure on Gains

On the 9th (local time), the US stock market closed higher ahead of the June Federal Open Market Committee (FOMC) regular meeting. The Dow Jones Industrial Average closed at 33,876.78, up 43.17 points (0.13%) from the previous trading day. The Standard & Poor's (S&P) 500 index rose 4.93 points (0.11%) to 4,298.86, and the tech-heavy Nasdaq index ended the day at 13,259.14, up 20.62 points (0.16%).

Image source=Reuters·Yonhap News

The S&P 500 index closed at its highest level since August last year. Within the index, technology, consumer discretionary, healthcare, and communication stocks rose, while materials, energy, utilities, real estate, and industrial stocks declined.

Tesla's stock price rose more than 4% on news that General Motors (GM) drivers will be able to use Tesla's Supercharger network starting next year. Additionally, GM announced that, like Ford, it plans to equip its vehicles with charging ports that can directly connect to Superchargers starting in 2025. This means switching from the current industry standard Combined Charging System (CCS·DC Combo) to Tesla's North American Charging Standard (NACS) connector, which is expected to trigger changes among other electric vehicle manufacturers.

Market expectations favor the Federal Reserve (Fed) holding interest rates steady at the June FOMC meeting. However, if the Consumer Price Index (CPI) for May, released on the 13th just before the meeting, comes in stronger than expected, the possibility of a Fed rate hike in June cannot be ruled out.

The domestic stock market is expected to start slightly lower on the 12th. Despite early strength in the US market, the emergence of profit-taking amid concerns about potential rate hikes and the shift by Australia and Canada toward raising rates are likely to weigh on the market, causing gains to be given back during the session.

Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, explained, "Profit-taking emerged mainly in the semiconductor sector, which had surged following TSMC's earnings announcement, causing the Philadelphia Semiconductor Index, which had been up nearly 2% at one point, to close with a 0.30% gain. This increases the likelihood of profit-taking in related stocks." He added, "Recently, although the Korean won and major economies including the US are experiencing economic slowdowns, the extent is limited, which has brought confidence into the economy. Additionally, expectations that the semiconductor industry's conditions will improve in the second half of the year, reducing export slowdowns, have helped expand the gains."

He continued, "This won appreciation can ultimately have a positive impact on foreign investors' supply and demand, so despite profit-taking, the domestic stock market is expected to remain resilient. Considering this, after a slight decline at the start, the market is likely to undergo a process of digesting selling pressure amid cautious sentiment ahead of US inflation data and the FOMC," he said.