[Good Morning Stock Market] "US Stock Market Decline Narrows, Negative Factors Priced In... Domestic Market Expected to Rebound"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] On the first trading day of September, the U.S. stock market closed mixed. On September 1 (local time), the Dow Jones Industrial Average rose 145.99 points (0.46%) to close at 31,656.42, and the large-cap S&P 500 index increased by 11.85 points (0.30%) to 3,966.85. Meanwhile, the tech-heavy Nasdaq index fell 31.08 points (0.26%) to 11,785.13.

Market participants remained cautious about tightening policies, and companies like Nvidia, which was notified by the Biden administration to halt exports of cutting-edge AI semiconductors to China, showed weakness. As a result, the Nasdaq initially dropped more than 2%. However, a subsequent influx of bargain buying narrowed the losses, which is expected to have a positive impact on the domestic stock market on the 2nd.

◆ Seo Sang-young, Head of Media Content Division at Mirae Asset Securities = The number of mass layoffs in the U.S. recorded 20,485, below the previously announced 20,810. Additionally, weekly new unemployment insurance claims decreased from 237,000 to 232,000, indicating resilience in the labor market.

Furthermore, the Institute for Supply Management (ISM) reported that the U.S. manufacturing Purchasing Managers' Index (PMI) for August was 52.8, exceeding the expected 52.0, suggesting robustness in the U.S. manufacturing sector.

Ultimately, these indicators drove the dollar's strength, and concerns over recessions in the UK and Eurozone contributed to the pound and euro weakening, further supporting the dollar's rise. With rising government bond yields and negative factors affecting tech stocks, the stock market showed a differentiated decline. However, the improvement in economic indicators alleviated fears of a U.S.-origin recession, prompting bargain buying.

The U.S. government demanded Nvidia and AMD halt exports of AI semiconductors to China, causing those stocks to decline. Additionally, concerns over expanded semiconductor regulations led the Philadelphia Semiconductor Index to fall 19.2%, leading the market downturn.

Moreover, the Chinese government announced a lockdown of Chengdu, the capital of Sichuan Province, due to new COVID-19 cases. This heightened concerns about a Chinese economic slowdown, causing declines in international oil and commodity futures markets, and weighed on travel and leisure sector stocks.

In the previous U.S. trading session, bargain buying emerged in the latter part of the day, narrowing losses. This is expected to positively influence the domestic stock market. Although the Philadelphia Semiconductor Index fell 1.92%, it reduced losses later in the session, and Micron reversed to gains, highlighting the presence of bargain buying sentiment, which is favorable.

Also, despite the dollar's strength and rising bond yields, the solid U.S. economic data is expected to boost expectations for increased Korean exports, improving investment sentiment. Considering this, the domestic stock market is expected to start with a rise of around 0.5%, followed by an influx of bargain buying. The factors causing the U.S. market decline, such as the dollar's strength, have already been priced in. In particular, foreign investor flows, which led the previous day's decline, are expected to positively influence investment sentiment, considering the stability of the foreign exchange market.

◆ Han Ji-young, Researcher at Kiwoom Securities = The previous U.S. stock market opened lower due to concerns over the Federal Reserve's continued tightening pressure following the strong ISM manufacturing index, Nvidia-related negative news, and worries about global demand slowdown due to the lockdown in Chengdu, China. However, technical buying emerged amid perceptions that the recent sharp decline was excessive, narrowing losses by the close.

Market sentiment has weakened amid consecutive price adjustments following the Jackson Hole meeting, with only new negative factors being added. While the current sentiment provides justification for selling stocks, the overall impact of these negative factors on the stock market is judged to be limited.

Today, the domestic stock market is expected to rebound, supported by the perception that the previous day's sharp declines caused by Taiwan shooting down a Chinese drone, the Chengdu lockdown, and U.S.-China tech conflicts were excessive, along with the easing of the U.S. market's sharp decline and expectations for a peak in the won-dollar exchange rate.

The ban on Nvidia's AI chip sales to China and Korea's semiconductor export slump in August may burden the domestic semiconductor sector. However, these factors were partly priced in the domestic market the previous day, and improvements in U.S. August ISM new orders closely linked to Korean export performance, along with valuation attractiveness of the KOSPI from both won and dollar perspectives, are expected to encourage bargain buying mainly by foreign investors.

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