[Good Morning Stock Market] US Market Tailwind... Will It Also Blow into the Domestic Market?

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] The US stock market rose sharply on the back of various economic indicators showing positive signs. The favorable trend in the US stock market has also increased expectations for a rebound in the Korean stock market, which has been trading within a box range for about three months. Experts analyzed that the domestic stock market's valuation burden has been significantly eased as corporate earnings forecasts continue to be revised upward, and that the potential for further gains is increasing as the market passes through a sideways phase.

On the 5th (local time), the New York Stock Exchange rose sharply, buoyed by previously released US employment data and economic indicators announced that day. The Dow Jones Industrial Average closed at 33,527.19, up 373.98 points (1.13%) from the previous session. The S&P 500 index rose 58.04 points (1.44%) to 4,077.91, and the tech-heavy Nasdaq index closed at 13,705.59, up 225.49 points (1.67%). Both the Dow Jones Industrial Average and the S&P 500 closed at record highs.

The market focused on various economic indicators. US nonfarm payrolls for March were recorded at 916,000, significantly exceeding the economists' forecast of 675,000 compiled by The Wall Street Journal. March's new employment figure was the highest since August last year. The unemployment rate for March fell slightly to 6.0% from 6.2% in the previous month.

Other economic indicators were also positive. The final March Services Purchasing Managers' Index (PMI) was 60.4, up from the previous month's confirmed figure of 59.8. The Institute for Supply Management (ISM) reported a March Services PMI of 63.7, far exceeding the expert forecast of 59.2 and the previous month's 55.3.

◆ Yumi Kim, Economist at Kiwoom Securities = The Korean stock market started higher, supported by the broad gains in the US stock market overnight. Ahead of the earnings season, sector and stock-specific differentiation is expected. Although the US employment report was partially priced in, the stabilization of long-term US bond yields and a weaker dollar are expected to be positive for the domestic market.

◆ Bongju Kang, Researcher at Meritz Securities = Since the beginning of the year, the stock market has been in a sideways trend for over three months. The KOSPI has fallen below 3,000 points several times but has managed to hold up with gradual rebounds. Various risk factors such as heightened economic recovery expectations, inflation concerns, and interest rate hike worries are being reflected in the market. Some leading stocks have also dropped 10-20% from their peaks. The key point going forward is how much the economic recovery and corporate earnings expectations, which drove the early-year rally, will materialize. Additionally, with the interest rate rebound phase already underway, valuation debates will continue. The ongoing upward revision of earnings forecasts has significantly eased recent valuation pressures, which is positive. The market is judged to be accumulating upward potential as it passes through a sideways phase.

◆ Jaeseon Lee, Researcher at Hana Financial Investment = The market is gradually becoming less sensitive to the rise in long-term bond yields, which was a variable in the March market, indicating that the stock market is overcoming its interest rate trauma. The S&P 500 surpassed 4,000 points last week, setting a historic high, and the Nasdaq, which had experienced a relatively deep correction, has shown improving investor sentiment since the announcement of President Biden's infrastructure plan.

In emerging markets, although investor sentiment improvement is not as strong as in the US, the Ishares Emerging MSCI ETF, which broadly holds emerging market stocks, saw the largest inflow of funds since 2016 in March, gradually reducing exposure to interest rate risks. The domestic stock market still has valid earnings momentum. The estimated net income for the KOSPI this year was recently tallied at a total of 138 trillion won, marking the largest weekly increase since the beginning of the year.

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