[Good Morning Market] New York Stock Market Plunge Paused... Eyes on US April CPI

[Image source=AP Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The U.S. stock market, which had been declining for three consecutive trading days, closed mixed due to a rebound buying trend. On the 10th (local time), the Dow Jones Industrial Average closed at 32,160.74, down 0.26% (84.96 points) from the previous session. The S&P 500 index rose 0.25% (9.81 points) to 4,001.05, and the tech-heavy Nasdaq Composite index gained 0.98% (114.42 points) to close at 11,737.67. The S&P 500 and Nasdaq indices, which had shown significant volatility, rebounded. The S&P 500 recovered the 4,000 level, which had been broken for the first time in a year the previous day. The halt in the sharp decline of the U.S. stock market is expected to have a positive impact on the domestic market on the 11th. However, ahead of the release of the U.S. April Consumer Price Index (CPI), both rebound buying and cautious sentiment are expected to appear simultaneously.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = Although rebound buying has flowed in due to recent declines, the U.S. stock market showed significant volatility due to remarks from Federal Reserve (Fed) officials indicating aggressive tightening policies. John Williams, President of the New York Federal Reserve Bank, and Loretta Mester, President of the Cleveland Federal Reserve Bank, argued that a 50 basis point (0.5 percentage point) interest rate hike should be considered in the next two Federal Open Market Committee (FOMC) meetings.

However, U.S. President Joe Biden's statement that "the U.S. is discussing the removal of tariffs on China," signaling an active response to inflation, was positively received by the market. Especially if the U.S. April CPI, to be announced the next day, falls below the previous month's figure as expected by the market, it is presumed that combined with the government's active response, inflationary pressures could stabilize downward faster than anticipated. Due to this influence, the U.S. stock market rose again before the close, led by semiconductors and large technology stocks.

The strong rebound buying sentiment in the U.S. stock market, particularly in semiconductors and technology stocks, is positive for the domestic market. Additionally, China's announcement of economic stimulus measures such as expanding the scale of new loans and broadening tax reduction policies for small and medium-sized enterprises to alleviate concerns about economic slowdown due to lockdowns, as well as President Biden's mention of the possibility of removing tariffs on China, are expected to act favorably in response to inflation.

Nonetheless, the Fed officials' remarks on tightening policies and concerns about economic slowdown highlighted the lack of upward momentum in the U.S. stock market, which is a burden. The domestic market is expected to start slightly lower and experience high volatility throughout the day as rebound buying and cautious sentiment clash ahead of the U.S. April CPI announcement.

◆ Ji-young Han, Researcher at Kiwoom Securities = Given that the U.S. stock market continued to experience significant intraday volatility in the previous trading session, the current market atmosphere seems dominated by a tendency to respond based on actual inflation data rather than statements from President Biden or the Fed.

When inflation will peak and how much it can decline after peaking are expected to be variables that determine the Fed's monetary policy path and the direction of the U.S. stock market. The U.S. April CPI is estimated to show a slower growth rate compared to the previous month (8.5%). However, the key issue is whether market participants form expectations of a peak, and it is necessary to pay attention not only to the stock market's movement after the announcement but also to changes in expected inflation.

On this day, the domestic market is also expected to attempt a rebound as low-price buying flows in amid the easing of the sharp decline in the U.S. stock market. However, cautious sentiment is likely to be strong surrounding the scheduled intraday announcements of China's April Producer Price Index and the U.S. April CPI. Considering this, the rebound's momentum is expected to be limited, and a differentiated market between sectors and stocks based on individual earnings issues is anticipated.

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