[Good Morning Market] U.S. Santa Rally Stalls... Korean Stocks Expected to Challenge Record Highs

Precious Metals Plunge, Big Tech Falters
Year-End Profit-Taking Drives Cautious Sentiment
KOSPI Eyes Record Highs as 'Earnings Momentum' Persists

The major indices of the U.S. stock market all declined. With trading volume decreasing ahead of the year-end holidays, the market showed weakness as investors engaged in profit-taking and year-end position adjustments.

On December 29 (local time) at the New York Stock Exchange, the S&P 500 index closed at 6,905.74, down 0.35% from the previous trading day. The tech-heavy Nasdaq index also fell by 0.50% to finish trading at 23,474.35. The Dow Jones Industrial Average dropped by 0.51% to 48,461.93.

The prices of gold and silver, which had been surging, also plunged. Last Friday, the Chicago Mercantile Exchange (CME) sharply raised margin requirements for futures contracts, halting the upward trend. The spot price of silver surged past $80 per ounce for the first time in overnight trading, but then plummeted by more than 9% during the session as a wave of sell orders hit the market. Gold followed a similar pattern, dropping by over 4%. The decline is attributed to investors who had used high leverage choosing to liquidate their positions rather than pay additional margin, compounded by large-scale profit-taking sales.

In the stock market, profit-taking and bargain-hunting continued, with the weakness in semiconductors, large-cap tech stocks, and financials fueling the decline in indices. Except for Micron Technology (+3.4%), profit-taking was observed in other artificial intelligence (AI)-related tech stocks such as Nvidia (-1.2%), Alphabet, the parent company of Google (-0.2%), and Meta (-0.69%). On the other hand, defensive sectors such as consumer staples, pharmaceuticals, utilities, and telecommunications remained resilient, indicating a rotation rather than a broad-based decline in indices.

Han Ji-young, a researcher at Kiwoom Securities, stated, "There is a growing sentiment to lock in year-end profits through profit-taking and prepare for next year's market." She added, "After the market closed yesterday, President Donald Trump mentioned that he would consider a lawsuit against Federal Reserve Chair Jerome Powell, leading to renewed noise from the Fed. As a result, there is increasing demand to wait and see the results of the December Federal Open Market Committee (FOMC) minutes."

The upcoming release of key U.S. economic indicators next week, such as nonfarm payrolls and the Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI), was also cited as a factor discouraging active trading. Ultimately, analysts believe that market participants are not attaching significant meaning to year-end stock price movements and will reset their strategies and resume trading from early next year.

The domestic stock market is also expected to face short-term profit-taking pressure as a result of the U.S. market's influence. However, considering Micron's strength and the won-dollar exchange rate staying in the 1,430 won range, there is a possibility of attempting to reach new record highs. This is because the fundamental driver behind the record-breaking annual rally in the KOSPI has been 'earnings momentum.' In particular, heightened expectations for fourth-quarter earnings, especially in semiconductors, are noteworthy.

The MSCI Korea ETF, which moves similarly to the domestic stock market, surged by 3.01%. This contrasts with the MSCI Emerging Markets ETF and the Philadelphia Semiconductor Index, which fell by 0.26% and 0.41%, respectively.

A researcher commented, "Even if the domestic stock market is exposed to volatility in the future, unless risks such as a surge in U.S. inflation or the bursting of an AI stock bubble, which could fundamentally change existing assumptions, spread widely, it would be appropriate to focus on a strategy of phased buying."