[Good Morning Stock Market] Additional Stimulus Agreement Still Far... Mixed Performance in US Stocks by Sector

Tech Stocks Rise and Energy Sector Falls
Profit-Taking Emerges in Domestic Market...Differentiated Outlook by Stock Expected

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The U.S. stock market opened higher on news of COVID-19 vaccine administration. However, due to sluggish progress on additional stimulus agreements, concerns over lockdown policies, and uncertainties about crude oil demand, stock movements were mixed. In the domestic market, investor sentiment is expected to improve due to positive factors such as China's real economy indicators, but profit-taking mainly in the U.S. market is likely to cause differentiated foreign investor flows across individual stocks.

On the 14th (local time), the U.S. stock market closed mixed. At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.62% to close at 29,861.55. The S&P 500 also dropped 0.44% to end at 3,647.49. The tech-heavy Nasdaq closed up 0.5% at 12,440.04.

◆Sangyoung Seo, Kiwoom Securities Researcher= The U.S. stock market started higher on news of COVID-19 vaccine administration, supported by expectations for additional stimulus measures. Notably, the announcement to separate the controversial liability waiver and $160 billion support for local governments from the $748 billion stimulus package and to process the latter first was effective. However, this was similar to the proposal by Senate Republican Leader Mitch McConnell last week, and the Democrats rejected the related announcement, leading to selling pressure. The concern is that without support for state governments, jobs of police officers, firefighters, and frontline public officials fighting COVID-19 could be at risk. Additionally, Senator Bernie Sanders and others stated they would reject extending federal budget negotiations unless the $1,200 per person payment is processed, raising fears of a government 'shutdown.'

Meanwhile, individual sectors showed mixed movements due to specific issues. The energy sector plunged amid uncertainty over next year's crude oil demand. The Organization of the Petroleum Exporting Countries (OPEC) forecasted next year's crude oil demand to decrease by 360,000 barrels per day to 95.89 million barrels. Especially, due to COVID-19 impacts in the first half of the year, demand is uncertain, and recovery to pre-COVID-19 levels by the end of next year is expected to be difficult. They also lowered this year's demand forecast, indicating a slower economic recovery than market expectations. As a result, international oil prices fell about 2% at one point, fueling weakness in the energy sector. Later, prices rebounded by 0.9% due to vaccine news and a Saudi oil tanker explosion, but negative factors persisted. Particularly, the news that Tesla would be included in the S&P 100 index while energy company Occidental would be removed acted as a negative factor. This was interpreted as a shift from traditional energy industries to electric vehicles or eco-friendly industries as the new trend.

Technology stocks with high expectations for earnings improvement mostly rose. Amazon (+1.30%) and Netflix (+3.82%) were representative examples. Semiconductor-related stocks such as Intel (+1.49%), NVIDIA (+2.27%), and AMD (+3.42%) also rose, pushing the Philadelphia Semiconductor Index up 1.19%. PayPal (+3.14%) and Visa (+0.49%) showed strength as rebound buying flowed in.

The domestic market is expected to show a similar pattern. Although negotiations on additional stimulus measures continue, uncertainties remain, so a differentiated market by stock rather than a broadly positive impact from vaccine administration is anticipated. Among these, attention should be paid to China's real economy indicators. November's industrial production, retail sales, and fixed asset investment data will be released, with expectations to exceed last month's figures. This raises hopes for economic recovery and improves investor sentiment. The fact that international oil prices ultimately closed higher and the U.S. dollar weakened against other currencies is also positive for foreign investor flows. However, considering the increased desire for profit-taking in global markets including the U.S., selling pressure is expected to be inevitable. A stock market characterized by changes centered on stocks favored by foreign investors is anticipated.

◆Hojung Kim, Yuanta Securities Researcher= A notable point in the December University of Michigan Consumer Sentiment Survey was the sharp rise in both the current conditions and expectations indices, mainly among Democratic supporters. This reflects policy expectations for President-elect Joe Biden. However, concerns remain in unemployment and income-related items.

Unemployment and real income issues are likely to negatively impact actual consumer activity and eventually manifest in expected inflation. The 12-month expected inflation rate has fallen to its lowest level since economic activities resumed, reflecting demand contraction due to current concerns about unemployment and income. Demand contraction lowers inflationary pressure. This acts as a constraint on the U.S. Federal Reserve's policy stance, which needs to adjust liquidity supply strength, and could become an obstacle to future economic recovery.

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