[Good Morning Stock Market] US Stocks Hit New Highs Amid FOMC Digest... Korean Stocks Expected to See Another Sectoral Market

Improvement in Investment Sentiment Still Pending... Profit-Taking Desire Grows at Record Highs
Be Cautious of Increased Volatility by Stock

On the 2nd (local time), traders are handling their tasks on the trading 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 digested the Federal Open Market Committee (FOMC) meeting and closed at record highs. However, individual stocks showed extreme differentiation, resulting in a somewhat mixed trend. The domestic stock market is also expected to continue showing a stock-specific market without significant improvement in investor sentiment.

On the 4th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 36,124.23, down 0.09% from the previous day. The S&P 500 index closed at 4,680.06, up 0.42%, marking an all-time closing high. The tech-heavy Nasdaq index also reached a record high, rising 0.81% to 15,940.31.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = The U.S. stock market started off mixed and flat as it digested the FOMC event. After the Bank of England (BOE) monetary policy meeting, government bond yields dropped sharply, causing financial stocks to underperform. Contrary to expectations of three members advocating rate hikes, only two did so, showing a dovish (preference for easing policies) stance. As a result, the pound weakened about 1.5% against the dollar, UK government bond yields fell significantly, and financial stocks weakened. BOE Governor Andrew Bailey’s recent shift away from hawkish (preference for tightening policies) comments led the market to regard this as one of the worst monetary policy communications in years due to a lack of communication.

However, volatility increased due to Nvidia’s sharp rise and earnings results from some companies. Additionally, Wells Fargo’s raised target price citing high expectations for the metaverse positively influenced the market. Volatility also expanded in other stocks such as Qualcomm and Moderna, resulting in extreme stock differentiation.

It is important to note that the rise in the U.S. stock market is more due to the surge in some individual stocks rather than an overall improvement in investor sentiment. Therefore, the domestic stock market is also expected to experience fluctuations based on individual stock factors rather than active movements, similar to the U.S. market.

◆ Jiyoung Han, Researcher at Kiwoom Securities = Similar to Federal Reserve Chair Jerome Powell’s remarks at the November FOMC, BOE Governor Bailey acknowledged that the current high inflation will persist for some time but is unlikely to cause a policy shift. Although visible resolution has not yet been reached in logistics and transportation, commodity markets such as oil, grains, and maritime freight rates have likely passed their peaks. Market anxiety over central banks’ early tightening stance is expected to ease over time.

The current environment surrounding the U.S. stock market is favorable, supported by the Fed’s more gradual monetary policy stance than expected, strong earnings expectations for tech growth stocks like Qualcomm and Nvidia, and positive employment outlooks indicated by weekly initial jobless claims. These factors have driven the U.S. stock market’s record rally, but signals of overheating investor sentiment are also being detected. In the short term, market volatility in the U.S. stock market may increase due to profit-taking and supply-demand factors accumulating from concerns over high valuations.

Despite favorable foreign demand the previous day, the domestic market showed a strong start but weak finish, and sector differentiation is expected. The Philadelphia Semiconductor Index’s 3.5% surge, driven by expectations of a bottoming out in IT sectors such as semiconductors, Nvidia’s metaverse platform development prospects, and Qualcomm’s earnings surprise, is positive for the domestic market. On the other hand, game and entertainment stocks, which had seen consecutive sharp rises due to metaverse and non-fungible token (NFT) themes, may face profit-taking pressure similar to the previous day, so attention to increased price volatility is necessary.

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