[Good Morning Stock Market] Infrastructure Stimulus Showing Effects... US Stock Market 'Soaring'

Measures to Foster Technology Industries Beyond Traditional Infrastructure Included... US Tech Stocks on the Rise
Various Economic Indicators Improve... Expectations for Economic Recovery Increase
Partial Anticipation in Korean Stock Market... Individual Stock Trends Expected

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The US stock market closed higher, led by technology stocks, following the US government's infrastructure stimulus plan revealed the previous day, which included not only traditional infrastructure development but also measures to foster the technology industry. It is analyzed that positive economic indicators such as manufacturing and employment also contributed. However, in the domestic stock market, since these positive factors were already priced in the previous day, an individual stock-driven market is expected.

On the 1st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,153.21, up 0.52% from the previous trading day. The S&P 500 index rose 1.18% to 4,019.87, surpassing 4,000 for the first time ever. It rose from 3,000 to 4,000 in just 434 trading days. The Nasdaq index, centered on technology stocks, surged 1.76% to close at 13,480.11.

◆ Yumi Kim, Kiwoom Securities Economist = The US stock market rose due to the Biden administration's infrastructure stimulus plan and favorable economic indicators. The manufacturing indicators confirmed a strong expansion in the economy, and employment indicators confirmed stabilization in the unemployment situation. Additionally, the direction became clear toward tax increases rather than bond issuance as a means of financing the stimulus plan, and with the resurgence of COVID-19 in Europe, the US 10-year Treasury yield sharply fell to around 1.67%, creating a bullish market centered on large technology stocks.

The US March Institute for Supply Management (ISM) manufacturing index announced that day was 64.7, exceeding both the previous month (60.8) and the forecast (61.7). It is historically the second-highest level and the highest in 37 years. It has shown expansion for 10 consecutive months since the COVID-19 pandemic, indicating continued economic expansion. The new orders index rose from 64.8 to 68.0, the production index from 63.2 to 68.1, the employment index from 54.4 to 59.6, and the inventory index from 49.7 to 50.8. Meanwhile, the price index fell slightly from 86.0 to 85.6. This is perceived as a mild economic recovery signal rather than strong inflation concerns.

Meanwhile, weekly initial jobless claims increased by 61,000 from the previous week to 719,000, exceeding the forecast of 675,000. As a result, buying demand strengthened mainly in long-term bonds in the bond market, causing bond yields to fall. However, noting the steady decline in the stock market this year, the overall impact on stock indices was limited. Rather, market participants are expecting confirmation of economic recovery through employment, anticipating that the upcoming employment report will show an increase of 650,000 new jobs.

The domestic stock market is expected to see an individual stock-driven market. Some of the positive factors for the semiconductor sector in the US stock market were partially reflected during yesterday's trading. It is judged that Taiwan's TSMC's expansion plans could negatively impact the domestic industry. On the other hand, the downward stabilization of government bond yields can serve as a foundation for individual growth stocks. Related domestic energy sectors are also expected to be strong due to rising oil prices. Additionally, it is judged that related sell-offs due to the CFD (Contract for Difference) tax issue will not emerge sharply.

◆ Namjoong Moon, Daishin Securities Researcher = The S&P 500 index has entered the 4,000 era in just two years. Considering it took five years to rise from 2,000 to 3,000 after entering 2,000 in 2014, the stock market is governed by a 'Moore's Law' of 'milestone indices.'

The US stock market is expected to continue its upward trend through the second quarter based on three momentum factors: ▲investment environment ▲corporate profits ▲government policies. Although concerns about rising interest rates cannot be completely erased, interest rate increases accompanied by earnings improvements during the economic recovery phase are not burdening the stock market's rise. The downward pressure on interest rates for growth stocks was already priced in during the February-March phase. Going forward, sensitivity to government policies favorable to growth stocks will increase.

From the corporate earnings perspective, annual earnings forecasts have been revised upward following vaccine distribution. If the formation of herd immunity in the US does not deviate significantly from expectations, the S&P 500's earnings per share (EPS) growth rate this year could exceed the peak performance in 2018, justifying the stock market's rise. The Biden administration's infrastructure investment plan offers more benefits than costs. The negative impact of tax increases for fiscal financing will be offset. Tax increases are expected to be implemented flexibly within a range that does not cause economic shocks. The focus should be on growth policies transitioning to the second phase of economic reconstruction.

Ultimately, rather than the burden of the 4,000 index level in April, the common denominator of the three momentum factors is the improvement of US fundamentals, signaling a need to shift thinking to value future growth potential over past performance.

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