U.S. Yields and Oil Prices Rise Again... Korean Stock Market Expected to Open Lower [Good Morning Market]

New York Stocks Stall Across the Board
Concerns Grow Over Prolonged High Interest Rates
Chances of Another Taper Tantrum Remain Low

The New York stock market declined across the board due to a renewed rise in U.S. Treasury yields and international oil prices. The domestic stock market is also expected to open lower.

On the 20th, the stock index of the domestic market is displayed on the electronic board in the Hana Bank dealing room in Jung-gu, Seoul. Photo by Kang Jinhyung

On the 20th (local time), the Dow Jones Industrial Average closed at 52,759.21, down 703.84 points (1.32%) from the previous session. The S&P 500 index finished at 7,641.16, down 66.82 points (0.87%), while the tech-heavy Nasdaq Composite Index ended at 26,067.17, down 263.93 points (1.00%) from the previous day.

Earnings from Walmart, the largest U.S. retailer, heightened concerns about a slowdown in consumer spending. Second-quarter U.S. same-store sales recorded the slowest growth rate in six years, and signs of reduced consumption due to high oil prices coincided, causing the share price to plunge 9.15%.

U.S. Treasury yields climbed again. The 30-year U.S. Treasury yield rose about 4 basis points (1bp = 0.01 percentage point) from the previous session to 5.24%. The 10-year U.S. Treasury yield, which serves as the global bond benchmark, also rose 5 basis points to reach 4.70%.

This came just one day after the U.S. Department of the Treasury announced it would expand the size of long-term Treasury buybacks, which briefly eased yields. Treasury buybacks are a system in which outstanding Treasuries are repurchased from the market to enhance liquidity in specific maturities and improve market functioning.

Despite U.S. Treasury Secretary Scott Bessent hinting in an interview with CNBC that "we have many policy tools at our disposal" and suggesting further buyback expansions, long-term yields continued to rise. Structural factors—including fiscal deficits, the burden of Treasury issuance, and large-scale corporate fundraising—continued to put upward pressure on yields.

Kiwoom Securities pointed out that the U.S. Treasury's response alone is insufficient to drive a sustained downward trend in yields. The brokerage noted that amid increasing structural supply in the bond market—such as sovereign issuance to cover fiscal deficits in advanced economies including the U.S., Japan, and Europe, as well as corporate bond issuance by large-cap tech companies for AI investments—a high-interest-rate environment is likely to persist for the time being.

However, unless yields rise sharply and rapidly, the probability of a renewed bout of market instability similar to a "taper tantrum" is seen as low. This is because, throughout the year, market participants have been frequently exposed to environments in which 10-year U.S. yields are above 4.5% and 30-year yields are above 5.0%, and are adapting to the high-rate environment. In addition, while government policy actions may be unable to produce a sustained decline in yields, they are expected to moderate the pace of increase.

Geopolitical risks in the Middle East have intensified, pushing international oil prices up by more than 2%. This stems from the United States announcing its plans for substantial economic pressure on Iran. Secretary Bessent will reveal the economic pressure plan against Iran on the 24th, stating, "It will be the most strongly coordinated economic isolation in world history." U.S. President Donald Trump also warned the previous day of an "unprecedented scale of economic isolation operation" against Iran.

October Brent crude futures and September West Texas Intermediate (WTI) crude futures closed at $93.78 per barrel (up 2.36% from the prior session) and $87.83 per barrel (up 2.33%), respectively. If the uptrend in international oil prices continues for an extended period, it could further intensify inflationary pressure, adding to the Federal Reserve's monetary policy challenges.

Jiyoung Han, a researcher at Kiwoom Securities, projected, "The domestic stock market is expected to open lower in response to factors such as higher U.S. market rates and disappointing Walmart earnings, with sectoral performance diverging depending on foreign investor flows as the session progresses."

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