New York Stocks Rebound After Rate Hike Shock... Domestic Market Expected to Open Higher [Good Morning Market]

U.S. Market Absorbs Fed Headwinds
Tech Stocks Lead Market Recovery
Expectations Grow for Foreign Inflows into Korean Equities

The New York Stock Exchange rebounded from the shock of the U.S. Federal Reserve's interest rate hike and managed to close higher. The domestic stock market is also expected to open on an upward trend.

On the 17th, the Korean won to US dollar exchange rate and KOSPI are displayed on the electronic board in the dealing room of Hana Bank in Jung-gu, Seoul. Photo by Yonhap News.

On the 17th (local time), the Dow Jones Industrial Average closed at 51,778.04, up 316.14 points (0.61%) from the previous session. The S&P 500 Index finished at 7,637.76, up 85.95 points (1.14%), while the technology-heavy Nasdaq Composite Index ended the day at 26,418.30, gaining 439.87 points (1.69%) from the previous close.

The stock market recovered within a day after plunging the previous day as the Fed not only raised its benchmark interest rate for the first time in three years and two months but also hinted at the possibility of further hikes. The recovery was attributed to several factors: a sharp decline in U.S. Treasury yields, a substantial drop in global oil prices, and the inflow of bargain hunting as market uncertainties were resolved by the start of the rate hike cycle.

The U.S. Treasury yields, which contributed to market anxiety, all fell across the board. The yield on the 10-year U.S. Treasury note, which surpassed the psychologically significant 5% threshold the previous day, dropped by 5.7 basis points (1 bp = 0.01 percentage point) to 4.946% as of 3 p.m. The yield on the two-year note, which is sensitive to changes in monetary policy, fell by 3.8 basis points to 4.688%. The yield on the 30-year note declined by 5 basis points to 5.296% at the close.

The continued decline in global oil prices also eased market concerns. With some easing of worries over a possible disruption in Saudi Arabian crude supply, November Brent crude futures fell 0.95% to close at $104.82 per barrel, while October West Texas Intermediate (WTI) futures finished at $101.91 per barrel, down 0.51%.

Technology and semiconductor stocks led the stock market rebound. Nvidia and Amazon, both part of the so-called 'Magnificent 7 (M7)', each climbed more than 2%, while Microsoft gained 1.5%. Leading semiconductor stocks related to artificial intelligence (AI), such as Qualcomm and Intel, soared by about 2% and 7%, respectively, driving the indices higher. Notably, a remark by Intel's CEO predicting a memory supply shortage in 2027 sparked strong gains across the semiconductor sector, with Micron rising 5.5%.

This rebound is expected to influence the domestic stock market as well, supported by the stabilization of U.S. 10-year Treasury yields after the September Federal Open Market Committee (FOMC) meeting, the rebound of U.S. equities centered on semiconductors, and the strong performance of KOSPI night futures. Although foreign investors have been net sellers for seven consecutive trading days, which has added supply-side pressure, this is viewed more as short-term risk management in response to uncertainties rather than a deterioration in market fundamentals. As macroeconomic uncertainties are believed to be at their peak, there is a possibility of foreign investors returning as net buyers.

Han Ji-young, a researcher at Kiwoom Securities, analyzed that, "At this point, it is more appropriate not to interpret the continuous net selling by foreign investors as a trend reversal or to prioritize reducing stock holdings during a rebound. Instead, it is preferable to focus on the potential for foreign investors to return as net buyers after the peak of macroeconomic instability, maintaining allocations in key sectors such as semiconductors. Furthermore, if temporary volatility occurs due to a supply gap ahead of the holidays next week, a strategy of increasing holdings through staggered purchases would be advisable."

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