[Good Morning Stock Market] Inflation Pressure Eases... "KOSPI Expected to Start Higher"

US PPI Down 0.5% MoM... Largest Drop in 3 Years
New Unemployment Claims Exceed Forecast

On the 13th (local time), the US stock market closed higher as signals confirmed that inflationary pressures were easing, reflected in data such as the Producer Price Index (PPI).

The Dow Jones Industrial Average rose 383.19 points (1.14%) to close at 34,029.69, the large-cap-focused S&P 500 index gained 54.27 points (1.33%) to finish at 4,146.22. The tech-heavy Nasdaq index climbed 236.93 points (1.99%) to end at 12,166.27. Notably, all 10 sectors of the S&P 500, except real estate, advanced. The Dow and S&P 500 reached their highest levels since February 15, while the Nasdaq turned positive after four trading days.

Image source=Reuters·Yonhap News

In March, the US PPI fell 0.5% month-over-month, marking the largest drop since April 2020. Compared to a year ago, the PPI increase slowed to the high 2% range. This was below Wall Street’s forecast of 3.0% and a deceleration from the previous month’s 4.9% rise. Considering that wholesale price increases typically pass through to consumer prices, this is interpreted as a signal that inflationary pressures are easing.

Additionally, employment data suggested that the labor market overheating is also easing. According to the US Department of Labor, initial jobless claims last week were 239,000, up 11,000 from the previous month, marking the highest level since January last year. This slightly exceeded the market expectation of 232,000. Continuing claims, which count those filing for unemployment benefits for at least two weeks, decreased by 13,000 to 1.81 million.

The market is increasingly optimistic that the Federal Reserve (Fed) is nearing the end of its rate hike cycle. According to the Chicago Mercantile Exchange (CME) FedWatch tool, federal funds futures currently price in over a 66% chance that the Fed will raise the benchmark rate by 0.25 percentage points in May, a baby step. Subsequently, a rate hold in June and a possible rate cut in July are anticipated.

On the 14th, the domestic stock market is expected to open higher. The US market’s strength, particularly in tech stocks, driven by easing inflationary pressures, is likely to have a favorable impact. Seosangyoung, head of the Media Content Division at Mirae Asset Securities, said, "Especially since the US dollar has weakened relative to other currencies, with the won-dollar exchange rate falling below 1,300 won, the won’s strength could positively influence foreign investor flows." However, he added, "Given that the US market’s gains are driven by inflation easing and individual tech company issues, and considering that the market rose an additional 0.4% during the previous day’s simultaneous opening due to option expiration-related flows, the domestic market’s rise is expected to be more limited compared to the US market."

He continued, "Furthermore, considering growing concerns about the economy, the domestic market is likely to start with about a 0.7% rise, followed by a phase of profit-taking, leading to a stock-specific market environment."

Han Jiyoung, a researcher at Kiwoom Securities, said, "With confirmed inflation declines securing downside rigidity, the Nasdaq’s strength centered on big tech and inflows following option expiration rebalancing are expected to create a positive trend."

Han also noted, "Meanwhile, the secondary battery sector experienced sharp declines due to institutional selling for portfolio adjustments around option expiration, continuing from the previous day. However, foreign and individual investors’ buying helped reduce the losses. While the secondary battery sector remains strong, there is also a diversification of inflows into other sectors with individual positive factors." She added, "From a macro perspective, the environment is not unfavorable for growth stocks, so it is necessary to keep monitoring sectors such as automobiles, displays, semiconductors, entertainment, and pharmaceuticals and biotechnology."

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