[Good Morning Stock Market] US April CPI Exceeds Expectations... Shockwave Expected Domestically

[Image source=AP Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The U.S. April Consumer Price Index (CPI) inflation rate was announced higher than market expectations, striking the U.S. stock market with inflation concerns. On the 11th (local time), the Dow Jones Industrial Average closed at 31,834.11, down 326.63 points (1.02%) from the previous session. The Standard & Poor's (S&P) 500 index fell 65.87 points (1.65%) to 3,935.18, and the tech-heavy Nasdaq index dropped 373.43 points (3.18%) to 11,364.24.

The U.S. April CPI rose 8.3% compared to the same period last year, a decrease from the 8.5% increase recorded the previous month. Additionally, the month-over-month increase was 0.3%, below the 1.2% rise recorded the prior month, confirming a peak in inflation. However, since the April CPI exceeded experts' expectations of 8.1%, concerns about prolonged high inflation caused the U.S. stock market to decline, which is expected to impact the domestic stock market on the 12th.

◆ Han Ji-young, Kiwoom Securities Researcher = Both the U.S. April CPI and core CPI exceeded market expectations, and inflation concerns intensified due to continued upward pressure on rent and wage prices among the index components. As confirmed by the Nasdaq crash and other U.S. stock market reactions, it will take time for inflation anxiety to subside following the key turning point of the April CPI announcement this month.

With both April CPI and core CPI recording higher-than-expected figures, the rise in prices related to service items such as housing costs and airfares, linked to reopening demand, is problematic. This suggests that current inflation is not only caused by the Ukraine crisis and supply shortages but is occurring across a broad range of sectors. Furthermore, it is connected to concerns that the U.S. Federal Reserve's aggressive interest rate hikes will be inevitable.

On this day, the domestic stock market is also expected to show a downward trend influenced by inflation anxiety, weakness in the U.S. stock market, and volatility in spot and futures supply and demand due to options expiration. Additionally, the fact that most cryptocurrencies are plummeting may become a burden for growth stocks.

Although the need for risk management has increased, the recent sharp decline in the domestic stock market is a panic selling (selling out of fear), so intraday lows and technical buying may emerge, and the index's drop is expected not to be large.

◆ Seo Sang-young, Mirae Asset Securities Researcher = The U.S. April CPI showed a slowdown in the rate of increase. The core CPI, excluding food and energy, rose from 0.3% month-over-month last month to 0.6%, but fell from 6.5% to 6.2% year-over-year. This indicates that inflation has peaked.

However, the April CPI figure exceeding expectations and housing costs, which account for one-third of the inflation, rising at the fastest pace since 1991, mainly due to rent, weakened the possibility of a slowdown in the Fed's interest rate hikes. While the outlook for inflation peaking remains, concerns about a cost-of-living crisis due to rising rent and food prices and economic slowdown have been highlighted.

In the U.S. stock market, sectors benefiting from the pandemic-era lifestyle easing fell amid concerns that high inflation and rising living costs will eliminate the everyday comforts previously enjoyed, increasing the likelihood of tech stock sell-offs in the domestic market. The possibility of the Fed easing its aggressive interest rate hike stance is also low, which could continue to weigh on investor sentiment.

However, China's active economic and stock market stimulus policies and the realization of the U.S. inflation peak are positive factors.

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