[Good Morning Stock Market] US Stock Market Mixed Amid Sharp Growth Rate Decline but Tech Stocks Rally... Impact on Domestic Market?

[Image source=Yonhap News]

[Asia Economy Reporter Jihwan Park] Despite a sharp decline in second-quarter growth, the U.S. stock market showed mixed performance, supported by strong technology stocks. In the domestic stock market, buying momentum may flow mainly into companies that have achieved earnings improvements, but there is also analysis that the possibility of a correction due to profit-taking cannot be ruled out.

On the 30th (Eastern Time), at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 26,313.65, down 225.92 points (0.85%) from the previous day. The Standard & Poor's (S&P) 500 index fell 12.22 points (0.38%) to 3,246.22, while the tech-heavy Nasdaq index rose 44.87 points (0.43%) to close at 10,587.81.

The U.S. stock market's second-quarter gross domestic product (GDP) growth rate plunged by -32.9% due to the impact of the novel coronavirus (COVID-19), but after the market closed that day, key technology companies scheduled to announce earnings maintained strong stock prices, which helped major indices reduce their losses.

◆ Sangyoung Seo, Kiwoom Securities Researcher = The second-quarter growth rates of Germany and the U.S. sharply contracted. In particular, the significant contraction in consumer spending and corporate facility investment due to shutdowns is expected to have a negative impact on the Korean stock market, which is highly dependent on exports.

Of course, the New York Fed forecasts through Nowcasting that the U.S. growth rate will grow by 13.31% in the third quarter, so the possibility that a U.S. recession will trigger a market correction is not high. However, although the recession was anticipated, the stock market has largely ignored it, so some degree of impact is inevitable.

Also, ongoing friction between the Democrats and Republicans over additional unemployment benefits in the U.S. and the weakening possibility of an agreement is a burden. This could increase the likelihood of a consumption cliff in the U.S. in August. The fact that large tech stocks, especially Facebook and Amazon, which announced earnings after the U.S. market closed, posted results exceeding expectations and surged sharply, shows a solid performance that is expected to help improve investor sentiment. However, large tech stocks showed a process of digesting sell orders after earnings announcements during after-hours trading, which reduced the gains and is a burden. Considering this, the Korean stock market may see buying momentum mainly in companies based on earnings improvements, but the possibility of profit-taking cannot be excluded.

◆ Byunghyun Jo, Yuanta Securities Researcher = At the July FOMC, the benchmark interest rate was maintained at the existing level (0?0.25%). This appears to be because the future situation remains variable due to COVID-19. It is true that the economy had shown a recovery from an extreme state for some time, but the recent slowdown in the recovery speed suggests that the Federal Reserve considers direct fiscal stimulus more urgent than monetary policy. Therefore, it seems that the Fed sees little meaning in proactively using policy tools immediately and has expressed an intention to monitor government stimulus measures and provide support retrospectively. As a result, increased dollar liquidity, rising government debt, and the low maintained interest rate level have influenced the dollar's weakness. There is a judgment that favorable conditions for the Korean stock market may be formed in terms of the dollar's direction as U.S. economic stimulus becomes more visible.

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