[Good Morning Market] "KOSPI Expected to Attempt Rebound Amid Volatility Driven by U.S. Uncertainties"

Market Rates Rise Following July FOMC Meeting
Oil Prices Rebound Amid Geopolitical Tensions

Amid growing uncertainty over interest rates and oil prices in the United States, volatility is expected to intensify in the early session of the Korean stock market on July 30, followed by an attempted rebound.

On the 29th (local time), the Dow Jones Industrial Average at the New York Stock Exchange (NYSE) fell 1,153.18 points (2.19%) from the previous session to close at 51,594.14. The S&P 500, which focuses on blue-chip stocks, dropped 112.64 points (1.52%) to 7,316.15. The tech-heavy Nasdaq Composite declined 433.97 points (1.74%) to finish at 24,442.94.

On the 29th (local time), traders are working at the New York Stock Exchange (NYSE) in the United States. Photo by Reuters Yonhap News

On the same day, the U.S. Federal Reserve (Fed) decided to keep its benchmark interest rate unchanged for the fifth consecutive time. Although Fed Chair Kevin Warsh reaffirmed the Fed’s commitment to price stability during a press conference after the Federal Open Market Committee (FOMC) regular meeting, a sharp rise in long-term U.S. Treasury yields heightened market anxiety. CNBC highlighted that despite inflationary concerns, the bond market reflected fears that the Fed may be falling behind in controlling inflation due to five consecutive rate pauses. Additionally, international oil prices surged amid concerns over a potential U.S.-Iran conflict.

The semiconductor sector also continued its downward trend, with notable declines for Micron (down 9.94%), KLA (down 10.80%), and AMD (down 5.51%). After the closing bell, the earnings releases of Microsoft (MS) and Meta led to divergent after-hours stock movements. Microsoft outperformed average market forecasts and saw a sharp after-hours rally of over 8%, while Meta slumped by more than 8% due to mounting concerns over profitability.

Regarding the Korean stock market, Ji-Yong Han, an analyst at Kiwoom Securities, commented, “July’s FOMC meeting, ongoing geopolitical uncertainties, a broad-based decline in U.S. semiconductor stocks, and the mixed after-hours performance of Microsoft and Meta will all contribute to market headwinds. However, as the recent series of selloffs have driven valuations into an oversold state, we expect heightened volatility in the early session to be followed by an attempted rebound.”

He emphasized, “A monthly decline of more than 20% in the KOSPI has historically occured only during extraordinary crises such as the foreign exchange crisis and global financial crisis. At present, the negative narrative surrounding the leading semiconductor stocks—such as profit peaking and the end of the AI investment cycle—has emerged, but it is important to note that fundamentals are not being damaged, as earnings estimates have yet to experience a significant downward revision.”

He added, “Rather than an extreme pessimistic scenario, it is more appropriate to prioritize a recovery scenario consisting of ‘retracement of the recent sharp declines,‘ ‘inflow of bargain hunters,‘ and ‘strengthening momentum for a rebound.’”

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