[Good Morning Market] Yellen's Confidence, Will It Also Lead Strength in the Domestic Stock Market?

[Asia Economy Reporter Ji Yeon-jin] Despite signals of an economic recession, the U.S. stock market closed higher on the 27th (local time). The announcement of a sluggish U.S. economic growth rate (GDP) highlighted the likelihood of a reduced rate hike in September, and U.S. Treasury Secretary Janet Yellen's expression of confidence in the economy lifted stock prices. The Dow Jones Industrial Average closed at 32,529.63, up 332.04 points (1.03%) from the previous session, while the Standard & Poor's (S&P) 500 index rose 1.21%, and the Nasdaq index increased by 1.08%.

The U.S. Department of Commerce announced that the U.S. GDP for the second quarter was preliminarily estimated to have decreased at an annualized rate of 0.9% compared to the previous quarter. Following a -1.6% in the first quarter, the two consecutive quarters of negative growth indicate that the U.S. economy has entered a technical recession.

◆ Seo Sang-young, Researcher at Mirae Asset Securities = The fact that the U.S. stock market rose despite the second-quarter GDP growth rate being negative is positive for the Korean stock market. However, despite the expressed confidence in the U.S. economy, the ongoing economic slowdown could be a burden. This could increase the possibility of won depreciation, negatively affecting foreign investor demand. After the U.S. market close, Amazon showed a robust sales report, rising over 12% in after-hours trading, and Apple also rose over 3% following its earnings announcement, which is positive. However, Intel reported weak earnings due to a slowdown in major sales and plunged over 9%, which is a burden. Considering this, the Korean stock market is expected to start with a rise of around 0.5%, followed by sector differentiation.

The U.S. stock market turned upward as the GDP results highlighted a reduced scale of rate hikes in September, along with expectations for the passage of Biden’s climate bill. Later in the session, Treasury Secretary Yellen’s expression of confidence in the economy expanded the gains. Economic stimulus measures such as the passage of the semiconductor industry promotion bill by the U.S. Congress also had a positive impact.

Expectations for the passage of climate-related legislation boosted solar energy stocks such as First Solar (+15.29%) and Enphase (+7.62%), as well as wind energy companies like NextEra Energy (+5.18%). Ford (+6.14%) rose after reporting strong profit growth and announcing an increase in cash dividends. Additionally, General Motors (+3.06%) and Tesla (+2.21%) benefited from expectations of expanded electric vehicle tax credits, which also contributed to the rise.

◆ Han Ji-young, Researcher at Kiwoom Securities = U.S. President Joe Biden and Treasury Secretary Yellen emphasized that considering the solid labor market and robust private consumption, the second-quarter GDP announcement does not indicate a real recession. Federal Reserve Chair Jerome Powell also mentioned during the Federal Open Market Committee (FOMC) press conference that GDP preliminary figures are often revised later, indicating that policymakers are cautious about acknowledging a recession.

Today, the domestic stock market is expected to show strength, supported by relief from the FOMC, a rebound in the U.S. stock market following the de facto confirmation of a recession, and a well-progressing second-quarter domestic earnings season. Furthermore, after the market close, Apple (+0.4%) recorded an earnings surprise due to strong iPhone sales and is showing a 3% gain in after-hours trading, while Amazon is surging over 11% after-hours due to an earnings surprise driven by strong performance in its core cloud business. This is expected to improve investment sentiment for domestic semiconductor, IT hardware, and growth stocks.

However, Intel (-1.1%) issued a negative guidance due to a sharp decline in PC demand and is plunging over 8% in after-hours trading, which may limit the upside of related IT stocks. Moreover, as seen yesterday with differentiated stock price movements across sectors such as domestic bio, solar, and cosmetics due to earnings issues, although the overall market environment today will be favorable, stock price momentum will likely vary depending on individual earnings issues.

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