[Good Morning Stock Market] US Stocks Close Mixed... Focus on Buyback Inflows in Korean Market

Sluggish Due to High Inflation Concerns... Rebounds in Late Trading on Rebound Buying
Expectations Rise for Rebound Buying Inflow in Domestic Stock Market as Well

On the 28th (local time), traders are working on the floor of the New York Stock Exchange in the United States.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The U.S. stock market closed mixed. Some selling emerged amid forecasts that high inflation will continue through next year, but a renewed buying spree followed after the House of Representatives announced it would vote on the government's debt ceiling negotiation bill. In the domestic stock market, with strong sentiment around China's manufacturing and service sector economic indicators, there is also a high likelihood of a rebound buying spree following recent declines.

On the 29th (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed at 34,390.72, up 0.26% from the previous day. The S&P 500 rose 0.16% to 4,359.46, while the tech-heavy Nasdaq fell 0.24% to 14,512.44.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = When Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), made hawkish remarks at an event hosted by the European Central Bank (ECB), the previously stabilizing government bond yields turned upward. He stated, "It is disappointing that supply chain bottlenecks have not improved and are worsening," adding, "Especially, high inflation is expected to persist longer than anticipated, continuing through next year." Powell joined Fed officials in asserting that inflation will not ease as the Fed had hoped but will instead prolong. Consequently, the yield on the U.S. 10-year Treasury bond began to widen its gains.

In the latter part of the session, the stock market rebounded on news from Congress. Senate Majority Leader Chuck Schumer of the Democratic Party announced that a bill to prevent a government shutdown could be voted on as early as the 29th (local time). House Speaker Nancy Pelosi also announced that a bill to suspend the U.S. debt ceiling would be voted on the same day. Although the Republican Party opposes both bills, leaving uncertainty, the market appears to view this positively.

The remarks by Chairman Powell and the resulting rise in U.S. Treasury yields are expected to weigh on the domestic stock market. However, Powell also made positive comments, saying that very strong economic growth is expected in 2022. Additionally, expectations are high for the Purchasing Managers' Index (PMI) for China's manufacturing and service sectors, which will be announced that day. Although recent regulatory tightening and power grid issues make it likely that the figures will fall short of expectations, this could increase the Chinese government's preference for stimulus measures. Considering this, the domestic stock market is expected to recover some of its recent losses by rebounding after an initial decline, with buying interest returning.

◆ Jiyoung Han, Researcher at Kiwoom Securities = The current market instability is judged to stem not from the direction of interest rates, as was the case in February and March, but from the speed of changes. Since the September Federal Open Market Committee (FOMC) meeting, the tapering (reduction of asset purchases) issue has largely been digested, but concerns about early rate hikes are reflected due to the increased possibility of prolonged high inflation. The possibility of a U.S. government shutdown has also failed to calm the rapid rise in interest rates.

However, as Chairman Powell emphasized, there is no evidence of rising future expected inflation, and it is necessary to note that there is some upward bias in the inflation expectations anticipated by economic agents. Also, the calming of sharp rises in commodity prices such as international oil and natural gas since midweek, which are major factors raising expected inflation, could be a relief factor. Furthermore, regarding a federal government shutdown, although bipartisan agreement may fail, historically there have been several such instances, so the impact is expected to be limited.

Considering the above factors, the domestic stock market is expected to attempt a rebound as bottom-fishing buying interest flows into large-cap and growth stocks, reflecting the perception that the recent two-day consecutive sharp decline was excessive. Although it will be difficult for the U.S.-originated rapid rise in interest rates to stabilize in the short term, considering that the market has already been digesting this during the week, sensitivity to the rapid rise in interest rates is expected to decrease over time.

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