[Good Morning Market] US Stock Market Rally... Growing Expectations for Rise

The number of new COVID-19 cases is breaking record highs day after day. On the 9th, citizens are waiting to get tested at a temporary screening clinic set up in the plaza in front of Seoul City Hall. Photo by Moon Honam munonam@

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Following South Korea, the U.S. stock market also closed higher on the 12th (local time). Expectations for corporate earnings, anticipation of the June Consumer Price Index (CPI), and remarks from Federal Reserve (Fed) officials who determine U.S. monetary policy all energized the stock market. However, in South Korea's case, the consumption shock from social distancing measures remains uncertain, leading to concerns that caution may weigh on the market.

Expectations for U.S. Stock Market Earnings

On the 9th, as the spread of COVID-19 intensifies, the KOSPI index is displayed in the dealing room of Hana Bank in Euljiro, Seoul. On this day, the KOSPI started at 3,245.52, down 7.16 points (0.22%) from the previous session, showing a downward trend. Photo by Moon Honam munonam@

On that day, as the earnings season began this week in the New York stock market, major indices surpassed all-time highs amid growing expectations. The Dow Jones Industrial Average rose 126.02 points (0.36%) to close at 34,996.18, the S&P 500 increased by 15.08 points (0.35%) to 4,384.63, and the Nasdaq Composite climbed 31.32 points (0.21%) to finish at 14,733.24.

However, the market is focusing on the June CPI report scheduled for release on the 13th. This is an indicator that can gauge the direction of the U.S. economic recovery. In May, the CPI rose 5% year-over-year. The core CPI, which excludes fuel and food, increased by 3.8% compared to the same period last year. If the increase slows as it did in May, concerns about inflation will ease. If the increase accelerates, worries about inflation and tapering are expected to grow. Dow Jones estimates that June CPI will rise 5% year-over-year, with core CPI increasing by 4%.

Domestic Stock Market Also Rises Followed by Profit Taking

Sangyoung Seo, a researcher at Mirae Asset Securities Media Content Division, said, "The KOSPI is expected to start with an increase of around 0.5%," adding, "The U.S. stock market's heightened expectations for earnings improvement ahead of the earnings season and the Fed officials' indications of a moderate monetary policy are expected to have a positive effect." However, he assessed, "Considering that the UK still claims the pandemic is not over and France plans to reinstate curfews in some areas, it is likely that the market will undergo a process of digesting profit-taking rather than expanding gains."

Jiyoung Han, a strategy researcher at Kiwoom Securities, analyzed, "The market is expected to show limited price movement today," explaining, "Uncertainty about the extent of the domestic consumption shock following the full implementation of level 4 social distancing in the Seoul metropolitan area and caution regarding the U.S. June consumer price data to be released after market close may limit the upper bound of today's market."

Jaeseon Lee, a researcher at Hana Financial Investment, explained, "With the economic reopening delayed and interest rates maintained at current levels, there is a high possibility that the rotation into growth stocks will continue," adding, "In the domestic stock market, the software sector among growth stocks showed relatively strong performance."

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