[Good Morning Stock Market] U.S. Rate Pressure Keeps Stocks Slightly Lower; Samsung Earnings in Focus

U.S. 10-year Treasury yield hits 5.36% intraday
Three major U.S. indexes close slightly lower
Samsung earnings and foreign investor flows in focus

U.S. stocks ended slightly lower across the board under pressure from rising Treasury yields. Even so, with losses narrowing during the session, Samsung Electronics' preliminary third-quarter results due on Oct. 8 and the resulting shifts in fund flows are seen as key factors that could determine the direction of the South Korean market.

On Oct. 7 (local time), the Dow Jones Industrial Average closed at 51,179.87, down 0.66% from the previous session. The S&P 500 fell 0.22% to 7,801.77, while the tech-heavy Nasdaq Composite lost 0.22% to close at 27,538.69.

Long-term interest rates weighed on the market. The yield on the U.S. 10-year Treasury rose as high as 5.36% during the session, its highest level since 2002. The 30-year Treasury yield also climbed to around 5.73%, its highest level in 24 years. However, strong demand at the U.S. Treasury's auction of $39 billion in 10-year notes helped pare the increase, bringing the yield down to 5.28%. Even so, with yields still above 5%, high borrowing costs and pressure on equity valuations remain concerns.

Minutes from the Federal Open Market Committee's (FOMC) September meeting, released that day, pointed to the possibility of further monetary tightening. Most participants judged that another rate hike by year-end was likely to be appropriate. They also stressed, however, that future decisions would depend on incoming data and the economic outlook. Mortgage applications for the week ended Oct. 2 fell 4.2% from the previous week, according to the Mortgage Bankers Association (MBA). The decline was attributed to the average rate on 30-year fixed-rate mortgages rising 0.19 percentage points from the previous week to 7.49%, its highest level since November 2023. Signs of weakening demand emerged alongside concerns about tighter monetary policy and rising interest rates.

International oil prices rose during the session before reversing course. West Texas Intermediate (WTI) futures fell 1.30% from the previous session to $88.28 a barrel, while Brent crude futures declined 0.38% to $100.20. Supply concerns eased somewhat after the International Energy Agency (IEA) decided to accelerate the release of existing stockpiles.

For the domestic market, the key question is how much Samsung Electronics' earnings announcement can offset the pressure from the United States. If its preliminary results exceed market expectations and lead to improved earnings forecasts, large-cap semiconductor stocks could help narrow the market's losses. Conversely, if results fall short of expectations and foreign investors also sell, the downturn could continue.

"Micron Technology's share price has risen only modestly despite its strong results, and Samsung Electronics and SK hynix have also failed to gain much momentum despite the September semiconductor export figures coming in well above expectations," said Han Ji-young, a researcher at Kiwoom Securities. "This is largely because market expectations for semiconductor stocks have risen, shifting the focus toward the sustainability of earnings from next year onward, rather than concerns about a deterioration in the semiconductor industry's conditions."

The MSCI Korea ETF, which is closely linked to movements in the domestic market, fell 1.45%. The Philadelphia Semiconductor Index also declined 1.15%. The won-dollar exchange rate closed at 1,340.40 won per dollar in the Seoul foreign exchange market the previous day.

"For Samsung Electronics' preliminary third-quarter results, investors should pay closer attention to the share price and changes in foreign investor flows immediately after the announcement, as well as revisions to earnings estimates for next year, than to whether results beat consensus," the researcher said. "Short-term supply-and-demand factors related to ETF rebalancing on Oct. 8 and 12, as well as options expiration, could also come into play. Meaningful changes in the broader domestic market's share price trends and foreign investor flows are likely to emerge starting next week."

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