Domestic Stock Market Pauses Ahead of Ceasefire Talks and Holiday Closure [Good Morning Market]

Memory Stocks Rise Despite Nvidia Drop
Market Volatility Remains a Constant
Reducing AI Value Chain Exposure Should Be a Lower Priority

While the New York stock market closed with a slight upward trend overnight, the domestic stock market is expected to undergo a period of digesting profit-taking following the previous day's surge. With breaking news on U.S.-Iran negotiations during trading hours and a wait-and-see sentiment due to the holiday on the following Monday, the index is likely to continue without a clear directional movement.

On May 21 (local time), the Dow Jones Industrial Average in New York closed at 50,285.66, up 276.31 points (0.55%) from the previous session. The Dow hit a new all-time high. The S&P 500 index rose 12.75 points (0.17%) to 7,445.72, while the tech-heavy Nasdaq Composite ended up 22.74 points (0.09%) at 26,293.10.

Nvidia's stock price, which announced its earnings after the market closed the previous day, fell by 1.8%. This is attributed to increased market expectations for earnings and profit-taking. As Jensen Huang, CEO of Nvidia, mentioned an increase in large-capacity storage and memory in AI data centers, memory semiconductor stocks rose. Micron (up 4.11%), SanDisk (up 10.75%), Seagate (up 7.91%), and Western Digital (up 5.84%) all advanced.

The New York stock market fluctuated in early trading in response to news related to the Iran negotiations. Early on, there were media reports that Iran's new leader Mojtaba Khamenei had ordered a ban on exporting enriched uranium overseas, which caused a temporary spike in U.S. Treasury yields and international oil prices. However, as expectations grew for a possible diplomatic resolution between the two sides, the market reversed to an upward trend. U.S. Secretary of State Marco Rubio stated that "there are several positive signals" regarding the Iran talks, which helped stabilize investor sentiment.

Both international oil prices and U.S. Treasury yields turned downward. July Brent crude futures closed at $102.58 per barrel, down 2.32% from the previous session, and July West Texas Intermediate (WTI) futures ended at $96.35 per barrel, down 1.94%. The 10-year U.S. Treasury yield fell by 3 basis points (1bp = 0.01 percentage point) to close at 4.55%.

Kiwoom Securities analyzed that heightened volatility due to external factors such as U.S.-Iran negotiations and U.S. Federal Reserve policies should be regarded as a constant for the time being. In periods of increased uncertainty, the key driver that can offset negative shocks ultimately remains corporate earnings. Indeed, even as the KOSPI plunged nearly 10% over four trading days since the peak on May 14, stocks within the AI value chain, such as semiconductors (down 9.0%) and IT hardware (down 0.3%), showed relative resilience and demonstrated support.

Positive changes are also being observed on the supply and demand front. Since the beginning of the month, foreign investors had shown an average daily net selling of 5.7 trillion won, but on the previous day, their net selling shrank significantly to about 200 billion won. Notably, they shifted to net buying in the semiconductor (275 billion won) and IT hardware (41 billion won) sectors, which had seen net selling for 10 consecutive sessions.

Ji-Young Han, a researcher at Kiwoom Securities, stated, "For the time being, it may be effective to secure some cash as a risk diversification strategy for managing volatility. However, reducing positions in leading stocks at the core of the AI value chain, such as semiconductors and IT hardware, which drive market profits, should be considered a lower priority."

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