[Good Morning Market] Early-Year Rally Pauses for a Breather and Energy Recharge

Focus on U.S. Economic Indicators and Major Bank Earnings
Sharp Rally in Korean Stock Market... Concerns Over Sector Concentration

Last week, the New York stock market hit new record highs, buoyed by optimism about the semiconductor industry despite the delayed U.S. reciprocal tariff ruling and mixed December employment data. As the domestic stock market has also been rallying for several consecutive days, there are projections that a temporary pause may occur as investors seek to realize profits and alleviate the concentration of funds in certain sectors.

On the last trading day of last week, January 9 (local time), the S&P 500 Index closed at 6,966.28, up 0.65% from the previous day on the New York Stock Exchange. The Dow Jones Industrial Average also rose 0.48% to finish at 49,504.07. Both indices closed at all-time highs. The tech-heavy Nasdaq Composite Index climbed 0.81% to 23,671.35 compared to the previous day.

This week, attention in the stock market is expected to focus on the U.S. Supreme Court's decision regarding the reciprocal tariffs promoted by President Donald Trump. Since the Supreme Court has announced that it will issue key rulings on January 14, it is anticipated that the reciprocal tariff policy will also be addressed.

However, some analysts suggest that even if the policy is ruled illegal, the impact on the stock market may be limited. This is because, aside from reciprocal tariffs, tariff policies can still be maintained through alternative measures such as Section 232 of the Trade Expansion Act. Additionally, the possibility that previously paid tariffs will be refunded gradually over a long period, rather than in a lump sum, is another factor that could ease the burden. While this may be a key issue from political and trade perspectives, its influence on the stock market may be less significant than other economic indicators or earnings announcements.

Immediately ahead, the U.S. Consumer Price Index (CPI) for December 2025 will be released on January 13. The Producer Price Index (PPI) for October and November, which was delayed due to the temporary federal government shutdown, will be released on January 14.

Major banks are also set to announce their earnings. JPMorgan Chase will report on January 13, while Citigroup, Wells Fargo, and Bank of America (BoA) are scheduled to release their results on January 14. The market will be watching their fourth-quarter net profits and loan growth rates to gauge the direction of the U.S. economy and the effects of inflation. Although big tech companies related to artificial intelligence (AI) have been leading the market, the overall valuation burden in the U.S. stock market has been mounting, so the degree of profit-taking across the market could vary depending on the financial sector's performance.

Remarks from senior officials at the U.S. Federal Reserve (Fed) are also expected to be variables. On January 12, Thomas Barkin, President of the Federal Reserve Bank of Richmond, and John Williams, President of the Federal Reserve Bank of New York, will deliver speeches. On January 13, Alberto Musalem, President of the Federal Reserve Bank of St. Louis, will speak, followed by a speech from Fed Governor Stephen Miran on January 14.

In the domestic market, attention should be paid to the upward trend in KOSPI earnings forecasts following Samsung Electronics' preliminary results last week. Since the beginning of the year, the consensus for KOSPI's operating profit for 2026 has been revised upward by 10.8%, from 427 trillion won to 473 trillion won. This exceeds the KOSPI's rise of 8.7% over the same period. However, there remains a possibility that the rapid upward adjustment could temporarily slow down.

The MSCI Korea Stock Market Exchange-Traded Fund (ETF), which moves similarly to the domestic market, rose 2.16%, hitting a new 52-week high. The MSCI Emerging Markets Index ETF and the Philadelphia Semiconductor Index also set new intraday records.

Whether the concentration of funds in certain sectors will ease is also a key point. Although the KOSPI surged during the six trading days since the beginning of the year, the average number of rising and falling stocks during this period was 316 and 470, respectively. This indicates that the upward momentum has been concentrated in a few sectors such as semiconductors, shipbuilding, defense, and automobiles.

Han Ji-young, a researcher at Kiwoom Securities, explained, "Bullish factors in individual industries, such as the semiconductor supercycle and physical AI, have led to the concentration of funds in a few sectors," adding, "Investors should be prepared for a temporary pause in the sectors that have surged early in the year, as profit-taking and the desire to reduce concentration overlap."