[Good Morning Stock Market] "Positive Investor Sentiment and Economic Contraction Clash... KOSPI Expected to Start Flat"

US Stock Market Ends Flat Ahead of Independence Day Holiday
Electric Vehicle Delivery Increase Reflected Previous Day...Limited Upward Momentum

On the 3rd (local time), the U.S. stock market closed with slight gains. The Dow Jones Industrial Average rose 10.87 points (0.03%) to 34,418.47, the S&P 500, which focuses on large-cap stocks, increased by 5.21 points (0.12%) to 4,455.59, and the tech-heavy Nasdaq rose 28.85 points (0.21%) to 13,816.77. Due to the Independence Day holiday, the New York Stock Exchange closed early at 1 p.m. that day and will be closed the following day.

Image source=AFP·Yonhap News

Among the 11 sectors within the S&P 500, nine sectors excluding technology and healthcare all rose. Tesla's stock price surged nearly 7% after reporting Q2 vehicle deliveries of 466,000 units, an 83% increase compared to the same period last year. Rivian also rose more than 17% after announcing vehicle delivery results that exceeded expectations. Chinese company Xiaopeng also gained over 4% on the New York market following news of increased vehicle deliveries compared to the previous quarter.

With the Independence Day holiday approaching, the market was quiet, and attention focused on upcoming economic indicators. This week, key economic data including the June employment report and the minutes of the June Federal Open Market Committee (FOMC) meeting are scheduled to be released. The FOMC minutes, to be published on the 5th, will detail internal discussions related to the Federal Reserve's decision last month to keep the benchmark interest rate unchanged. Market consensus favors a resumption of rate hikes at this month's meeting. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently prices in about an 86% probability of a July baby step (a 0.25 percentage point rate hike).

Investors are also focused on the employment report to be released on the 7th. The market estimates that nonfarm payrolls increased by 240,000 in June compared to the previous month. The unemployment rate for June is expected to be 3.6%. Additionally, speeches by Fed officials and earnings reports from companies such as Coca-Cola and Levi Strauss are scheduled.

However, manufacturing indicators were weak. S&P Global's final June Manufacturing Purchasing Managers' Index (PMI) was confirmed at 46.3, marking the lowest level in six months. The Institute for Supply Management (ISM) also reported a June manufacturing PMI of 46, falling short of the market forecast of 47.3.

The domestic stock market is expected to start the 4th in a narrow range. Seo Sang-young, Head of Media Content at Mirae Asset Securities, said, "The U.S. market closed slightly higher ahead of the holiday, so the domestic market is expected to show limited changes. In particular, the sharp rise in the electric vehicle sector that led the U.S. market's gains was already reflected in the domestic market yesterday through strength in the secondary battery sector, so its impact is expected to be limited."

He added, "Although the Philadelphia Semiconductor Index rose 0.83%, this mainly reflected expectations of U.S. Treasury Secretary Janet Yellen's visit to China, so its influence is not expected to be significant. Meanwhile, the weak U.S. ISM manufacturing index is a burden." Seo said, "Positive investor sentiment at a still-high level drove index gains, but the expanding economic slowdown shows that foreign investors' demand for the domestic market remains negative, which is also a burden. The domestic market is expected to start in a narrow range, but volatility is likely to continue as positive investor sentiment and economic contraction collide."

Han Ji-young, a researcher at Kiwoom Securities, said, "Currently, major sentiment indicators point to short-term stock overheating, so while the market may be frequently exposed to profit-taking pressure using certain factors already reflected in the market such as recession concerns, it is appropriate to avoid strategies betting on a market downturn. On this day, amid foreign investors' cautious sentiment ahead of the U.S. market holiday, the market is expected to absorb short-term profit-taking mainly in the secondary battery and semiconductor sectors that surged the previous day and show a narrow range."

She continued, "The fact that electric vehicle-related stocks such as Tesla and Rivian in the U.S. market showed simultaneous strength due to increased delivery news could act as a tailwind for domestic secondary battery stocks, where short covering (buying back shares to close short positions) is possible following the previous day's surge. However, considering that the delivery increase news from U.S. electric vehicle companies was already priced in the domestic market the previous day, the price momentum of related domestic stocks is expected to be limited today," she added.