[Good Morning Stock Market] "Positive US Expected Inflation Slowdown... Domestic Market Starts Higher"

[Image source=AP·Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Ahead of the Consumer Price Index (CPI) announcement and the December Federal Open Market Committee (FOMC) regular meeting, the U.S. stock market closed higher as expected inflation figures slowed down. The Dow Jones Industrial Average rose 528.58 points (1.58%) from the previous session to close at 34,005.04, the large-cap S&P 500 index ended 56.18 points (1.43%) higher at 3,990.56, and the tech-heavy Nasdaq index finished trading up 139.12 points (1.26%) at 11,143.74.

The market is focusing on the November CPI release scheduled for the 13th and the Federal Reserve's December FOMC regular meeting results set for the 13th-14th. The argument that inflation has peaked is gaining traction. The November CPI is expected to rise 7.3% year-over-year and 0.2% month-over-month, showing a slowdown compared to October's increase.

Inflation expectations have also eased. According to the January consumer outlook survey released by the New York Federal Reserve Bank, the expected inflation rate for the next year was 5.2%, down 0.7 percentage points from the previous month and the lowest level since August last year. The expected inflation outlook for the next three years also slowed to 3.0% from 3.1% the previous month, and the five-year expected inflation rate dropped 0.1 percentage points to 2.3%.

The market expects the Fed to slow the pace of tightening by raising rates by 0.5 percentage points instead of 0.75 percentage points at the December FOMC.

The fact that most stocks in the U.S. market showed strength is positive for the domestic market. Additionally, the Philadelphia Semiconductor Index rose 2.14%, which is also favorable. Considering these factors, the domestic market is expected to start higher on the day.

◆ Seo Sang-young, Head of Media Content Division at Mirae Asset Securities = The New York Fed’s consumer expectation survey showed that the one-year expected inflation rate eased from 5.9% to 5.2%, spreading expectations among U.S. consumers that inflation is declining. This downward revision is presumed to be due to a slowdown in gasoline and food sectors. Expectations for housing price increases also fell, reaching the lowest level since May 2020.

However, U.S. Treasury yields showed an upward trend, appearing to rebound after recent declines. Despite the rise in yields, the impact on tech stocks was limited because the downward revision of expected inflation led to a wait-and-see stance ahead of the CPI and FOMC results.

Except for some stocks like Tesla, which had negative outlooks in surveys, most U.S. stocks showed strength, which is expected to positively influence the domestic market. Particularly, despite rising Treasury yields, the software sector and some semiconductor sectors showed strength, indicating sector differentiation, which is also favorable. However, concerns about the economic outlook remain, and with CPI and FOMC results approaching, the wait-and-see stance is likely to continue.

The downward revision of the New York Fed’s one-year expected inflation rate is analyzed as a factor that increases the possibility of a soft landing for the U.S. economy next year, thus acting as an overall positive factor for investment sentiment. Considering these points, the domestic market is expected to start about 0.5% higher and then show strength supported by improved foreign investor flows.

◆ Han Ji-young, Researcher at Kiwoom Securities = Ahead of major events such as the CPI announcement and the December FOMC regular meeting, caution was high, limiting upward momentum. However, based on the slowdown in expected inflation indicators, the market appears to be betting in advance that the November CPI will meet or fall below expectations.

In theory, expected inflation tends to influence actual inflation changes by affecting price setting and wage negotiations among real economy agents such as companies and households, and central banks also focus on managing expected inflation, so this slowdown in indicators is a positive aspect.

However, since the FOMC results are scheduled immediately after the CPI announcement this month, and FOMC uncertainty remains high regardless of CPI uncertainty, the existing view that directional bets should be made after the FOMC concludes is maintained.

With technical buying inflows today and the U.S. stock market’s strength driven by the decline in the New York Fed’s expected inflation indicators, the domestic market is expected to rebound. However, caution ahead of the U.S. CPI event is causing sluggish trading, limiting the overall rebound momentum of the index and leading to a market environment focused on individual stocks.

The sharp drop in Tesla’s stock price may negatively affect related sector sentiment, but considering that this is a Tesla-specific negative factor rather than a sector-wide issue and that the decline in domestic secondary battery stocks is perceived as excessive, the shock is expected to be limited.

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