[Good Morning Stock Market] US Stocks Close Mixed Amid COVID Stimulus and Brexit Uncertainty

Stalled US Additional Stimulus Talks... Mixed Close Amid Profit-Taking Selling
Domestic Stock Market Also Sees Increased Profit-Taking Desire... "Stock-Specific Market Expected"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The U.S. stock market closed mixed amid political disputes over the U.S. government's additional COVID-19 economic stimulus package and uncertainties such as Brexit (the United Kingdom's withdrawal from the EU). The domestic stock market is also expected to experience a stock-specific market as profit-taking desires increase due to these uncertainties.

◆Sangyoung Seo, Kiwoom Securities Researcher= On the 7th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 30,069.79, down 0.49% from the previous trading day. The S&P 500 also fell 0.19% to 3,691.96. During the same period, the Nasdaq closed up 0.45% at 12,519.95. Uncertainty over Brexit and COVID-19-related anxiety led to profit-taking selling mainly in value stocks that had recently driven gains, causing a decline at the start of trading. Later, buying interest flowed into growth stocks with high earnings improvement expectations, leading the Nasdaq to turn positive and reduce losses. In the afternoon, controversy over the additional stimulus package continued, causing another round of selling, but the market stabilized and closed mixed after the government announced measures to prevent a government shutdown.

The U.S. stock market was influenced by the resurgence of COVID-19, additional stimulus measures, and Brexit, with changes occurring mainly in stocks affected by individual issues. Before the market opened, news that the European Union (EU) and the United Kingdom failed to narrow differences in post-Brexit relationship negotiations caused the pound sterling to plunge, increasing volatility in the foreign exchange market. Amid this, profit-taking selling emerged from value stocks that had risen due to the effectiveness of COVID-19 vaccines, weighing on the stock market. This appears to be related to Dr. Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases (NIAID), stating that the vaccine would not immediately improve COVID-19 mortality rates. Additionally, a poll showing that 40% of Americans would not get vaccinated and announcements of further lockdowns in New York and California added to the burden. Furthermore, the World Health Organization (WHO) expressed concerns that the perception that COVID-19 is over due to vaccines is growing, which also contributed to selling pressure.

Meanwhile, the U.S. Congress is rushing to pass additional stimulus measures and the government budget bill within this week. The Democratic leadership supported a bipartisan plan worth $900 billion. As the additional unemployment benefits provision expires this month, without further action, 12 million people will lose benefits and millions will face eviction threats. Therefore, they aimed to pass at least the $900 billion plan ahead of the existing $2.2 trillion stimulus package. However, Senate Majority Leader Mitch McConnell and progressive senators like Bernie Sanders oppose the plan, citing insufficient funding. Nonetheless, positive signals emerged as Larry Kudlow, director of the White House National Economic Council, claimed that a stimulus deal was increasingly likely near market close, followed by news that Congress would vote on a one-week budget on Wednesday to prevent a government shutdown.

On the previous day, the Korean stock market rose as foreigners sold a net 60 billion won but buying concentrated on semiconductor-related stocks with high expectations for business improvement and earnings recovery. Notably, despite the overall Asian market declining due to escalating U.S.-China tensions, the Korean market showed strength. However, considering that the number of declining stocks (551) exceeded advancing stocks (298), investor sentiment appeared subdued. Similar to the U.S. market, amid uncertainties over additional U.S. COVID-19 stimulus measures, overall profit-taking desires increased, and a stock-specific market is expected where fluctuations depend more on individual stocks than indices.

◆Daejun Kim, Korea Investment & Securities Researcher= Starting today, Korea is strengthening quarantine measures, including raising social distancing levels. As a result, the spread of COVID-19 is expected to slow down, similar to March and September. However, unlike then, fear of infection was at its peak and expectations for vaccine availability were low, so direct comparisons are difficult. Therefore, although the overall environment is similar, it is necessary to partially understand market changes through the slightly earlier European cases.

The reference point was October 30, when France imposed a full lockdown on interregional movement. Examining the two weeks before and after that date, before the lockdown, COVID-19 case increases led to strength in COVID-19 beneficiary sectors such as communication and essential consumer goods, while cyclical sectors showed weak performance. Conversely, after the lockdown began and COVID-19 cases started to decline, cyclical sectors began to recover.

A similar trend is expected in the Korean market toward the end of the year. If considering sector differentiation, it is essential to monitor government quarantine intensity and COVID-19 spread. If the situation changes, cyclical sectors such as finance, consumer discretionary, industrials, and IT are likely to show strong performance.

This content was produced with the assistance of AI translation services.