[MarketING] Nvidia Positive News VS Debt Ceiling and Interest Rate Uncertainties

KOSPI Starts Higher Then Turns Lower
Debt Ceiling and Interest Rate Uncertainty Exert Downward Pressure

The KOSPI turned to a downward trend after starting with gains. Semiconductor stocks showed strength, buoyed by Nvidia's strong earnings, leading to a recovery above the 2570 level after an initial rise, but the upward momentum could not be sustained. This appears to be due to downward pressure from uncertainties surrounding the US debt ceiling negotiations and interest rate paths.

KOSPI Turns Down After Rising Start... Drops Below 2560 Level

As of 11 a.m. on the 25th, the KOSPI was at 2557.82, down 9.63 points (0.38%) from the previous day. The KOSDAQ fell 3.37 points (0.39%) to 852.09.

[Image source=Yonhap News]

Despite the initial rise supported by strong earnings from Nvidia and gains in Samsung Electronics and SK Hynix, the difficulties in the US debt ceiling negotiations and uncertainties about the interest rate path, which had caused declines in the US stock market the previous day, weighed on the market.

On the 25th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.77%, the S&P 500 dropped 0.73%, and the Nasdaq declined 0.61% compared to the previous day. Ji-young Han, a researcher at Kiwoom Securities, explained, "The US stock market closed lower due to downward factors such as difficulties in the debt ceiling negotiations, hawkish remarks by Fed Governor Christopher Waller, and Eurozone inflation concerns triggered by the UK’s April Consumer Price Index (CPI) exceeding expectations."

The debt ceiling negotiations are facing difficulties. Kevin McCarthy, Speaker of the House and a Republican, stated that there would be no progress in negotiations unless government budget spending cuts are included, showing a continued difference in stance with the White House, which wants to raise the debt ceiling first and then discuss spending issues. Treasury Secretary Janet Yellen warned, "One of the concerns is that even if an agreement is reached, there could be significant financial market pain," adding, "In 2011, the US credit rating was actually downgraded, and the stock market suffered nearly a 20% shock."

Sang-young Seo, a researcher at Mirae Asset Securities, said, "Compared to 2011, the difference in seats between Democrats and Republicans in both the House and Senate is not large, strengthening the power of the progressive Democratic bloc and the hardline Republicans, making it difficult to resolve internal opposition even if negotiations are concluded." He analyzed, "Due to these factors, in the worst case, the debt ceiling may not be raised by June 1. In this case, the Treasury can avoid a technical default by paying principal and interest, but this could cause various side effects such as a downgrade of the US credit rating, and as the deadline approaches without a resolution, financial market volatility is expected to increase."

Fed Governor Waller stated that he does not support pausing rate hikes in June until clear evidence is seen that inflation is falling in the credit environment, based on economic indicators to be released over the next three weeks. He particularly noted that recent data does not clearly indicate that the terminal rate has been reached, suggesting further rate hikes.

One researcher said, "As Governor Waller pointed out, data obtained over the next three weeks will influence the June Federal Open Market Committee (FOMC) rate decision," adding, "Although various scenarios about the interest rate path are circulating among market participants, the most likely scenario is that the rate hike cycle will end at the May FOMC and a hawkish signal will be sent at the June FOMC while maintaining the rate, so it is appropriate to establish response strategies based on this as the base scenario."

Samsung Electronics Hits 70,000 Won and SK Hynix Recovers to 100,000 Won on Nvidia Tailwind

Buoyed by Nvidia's strong earnings, Samsung Electronics and SK Hynix showed strength, with Samsung Electronics touching 70,000 won early in the session and SK Hynix recovering to the 100,000 won level.

Samsung Electronics is trading at 69,100 won, up 0.88% from the previous day. It touched 70,000 won early in the session, setting a new 52-week high. This is the first time Samsung Electronics has risen above 70,000 won since the end of March last year. SK Hynix is up 5.02% at 102,600 won, recovering to the 100,000 won level for the first time since July last year.

The strength in semiconductor stocks is due to Nvidia’s earnings surprise, which caused its shares to surge nearly 27% in after-hours trading on the New York Stock Exchange.

Nvidia announced that its fiscal second-quarter revenue is expected to be around $11 billion (approximately 14.531 trillion won), exceeding market expectations by more than 50%. Its fiscal first-quarter revenue (February to April) was also about $7.19 billion (approximately 9.4979 trillion won), about 10% above market expectations.

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