[Good Morning Stock Market] Mixed US Stocks Amid Rising Interest Rates... "KOSPI Expected to Start Slightly Lower"

US Stock Market Surpasses Earnings Estimates but Interest Rates Rise
"Profit-Taking Pressure Will Be High... Economic Recovery Expectations Offset"

On the 14th (local time), the US stock market showed mixed results despite news that corporate earnings for the second quarter of this year exceeded expectations, due to rising Treasury yields. The Dow Jones Industrial Average closed at 34,509.03, up 113.89 points (0.33%) from the previous session, while the large-cap S&P 500 index fell 4.62 points (0.10%) to 4,505.42. The tech-heavy Nasdaq index ended trading down 24.87 points (0.18%) at 14,113.70.

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JP Morgan and Citigroup reported earnings that beat expectations. JP Morgan's earnings growth was influenced by higher interest rates and increased interest income. Citigroup's earnings declined compared to the same period last year but still surpassed forecasts. Wells Fargo also posted better-than-expected results. Insurance company UnitedHealth similarly recorded net income and operating revenue exceeding expectations, with its stock price rising more than 7%.

US interest rates initially fell but then rose again following remarks by Christopher Waller, a member of the Federal Reserve Board, who expects two more 0.25 percentage point rate hikes this year. He indicated that one of the hikes is likely to occur this month, but the timing of the second depends on economic data.

Additionally, the 10-year US Treasury yield rose more than 6 basis points (1bp = 0.01 percentage points) to 3.82%, and the 2-year Treasury yield increased over 9 basis points to 4.74%. The dollar, which had been weakening, also halted its decline.

The preliminary consumer sentiment index compiled by the University of Michigan rose to its highest level in nearly two years, intensifying concerns about tightening. The preliminary July University of Michigan consumer sentiment index surged to 72.6, the highest since September 2021. The one-year expected inflation rate was forecast at 3.4% in July, slightly up from 3.3% in June. The five-year expected inflation rate rose to 3.1% from 3.0% the previous month.

The domestic stock market is expected to start slightly lower on the 17th. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The easing of valuation pressure on the domestic stock market is having a positive effect, and expectations for a bottoming out in the semiconductor industry are rising. Although there is uncertainty about the pace of recovery, expectations for industry and profitability improvements are positive as we move into the second half of the year."

He added, "However, the ongoing economic slowdown centered on manufacturing is seen as a risk factor. The domestic stock market is expected to face strong profit-taking pressure due to adjustments in the US stock market, but expectations for economic recovery will partially offset this." He also noted, "Investors are likely to focus on China's second-quarter gross domestic product (GDP) and real economy indicators such as retail sales and industrial production, which are scheduled to be released during the day."

Han Ji-young, a researcher at Kiwoom Securities, said, "As inferred from the rebound in the University of Michigan consumer sentiment index and expected inflation, which move in line with the stock market direction, the Fed is expected to maintain a hawkish stance for the time being to curb the side effect of excessive asset price rebounds caused by expectations of a policy shift, which could trigger a rebound in inflation." She emphasized, "In this process, conflicting opinions among market participants about 'one additional tightening vs. two' are expected to cause frequent market volatility."

She continued, "However, it is appropriate to maintain a data-dependent view and establish a response strategy based on the assumption that the tightening cycle will end with the July Federal Open Market Committee (FOMC) meeting. The inflation event ended last week, and Fed officials have entered a blackout period ahead of the July FOMC, so economic indicators and earnings reports are expected to be the focus of the market this week."

The researcher also said, "Meanwhile, in terms of earnings, major stock markets including domestic and US markets are expected to have passed the bottom in the second to third quarters. From this perspective, the key will be whether the upcoming earnings season, centered on major tech and financial stocks such as Tesla, Netflix, and Morgan Stanley, can reaffirm these earnings bottom expectations."

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