[Good Morning Stock Market] US Interest Rate Hike Nears End vs Industrial Production Slowdown... Selling Pressure Likely to Continue

[Image source=Reuters Yonhap News]

On the 15th (local time), the U.S. stock market closed mostly higher, with most sectors except semiconductors showing gains amid expectations that the Federal Reserve (Fed) will raise interest rates in July but may cut them in December.

In the New York market, the Dow Jones Industrial Average rose 1.26% (428.73 points) to close at 34,408.06. The Standard & Poor's (S&P) 500 index climbed 1.22% (53.25 points) to 4,425.84, and the Nasdaq Composite Index increased 1.15% (156.34 points) to 13,782.82.

Microsoft (MS) gained 3.19% despite no specific news, buoyed by ongoing optimism about the AI industry. Nvidia (-0.80%) fell nearly 2% due to profit-taking, showing a mixed performance among AI-related stocks. Meta Platforms rose 3.10% on news that several investment firms have raised their ratings and target prices, expecting benefits from the AI industry. Tesla (-0.35%) initially dropped nearly 4% after Bank of America (BOA) forecasted its electric vehicle market share would slow to 18% by 2026, triggering profit-taking. However, it reversed course and rose due to buying interest fueled by falling interest rates.

Seosangyoung, Head of Media Content Division at Mirae Asset Securities: “US Industrial Production Slows... KOSPI Expected to Start Up Around 0.5%”

Yesterday, the Korean stock market fluctuated within a narrow range after digesting the FOMC meeting but turned lower following disappointing Chinese real economy data. However, the Chinese stock market rallied after the National Development and Reform Commission hinted at stimulus policies, which helped the Korean market reduce losses or even turn positive. Ultimately, the KOSPI fell 0.40% due to foreign investor supply concerns, while the KOSDAQ rose 0.71%.

Meanwhile, the U.S. stock market's continued gains based on solid investor sentiment are expected to positively influence the Korean market. The American Association of Individual Investors' weekly sentiment index showed that 45.2% of respondents expect the stock market to rise in six months, the highest since November 2021. This investor sentiment tends to attract buying on dips, indicating resilience in the U.S. market and likely benefiting the Korean market as well.

However, the semiconductor sector, which has driven gains due to the AI industry and business conditions, faced some pressure as the Philadelphia Semiconductor Index fell 0.85% amid profit-taking. Generally, concerns persist due to slowing U.S. and Chinese economies and the European Central Bank's (ECB) rate hike announcements. Considering the slowdown in U.S. industrial production, the Korean market is expected to start up around 0.5%, but selling pressure is likely to continue during the adjustment process.

[Image source=EPA Yonhap News]

Han Ji-young, Kiwoom Securities Researcher: “Focus on Industrials and Materials, Stocks Related to China Reopening”

Today, China's May retail sales grew 12.7%, industrial production 3.5%, and fixed asset investment 4.0%, all falling short of expectations. The urban unemployment rate was 5.2%, and youth unemployment among those aged 16-24 reached 20.8%, marking a record high.

Since these weak indicators were already anticipated by the market, expectations for stimulus measures have increased, leading to gains in mainland China and Hong Kong markets yesterday. Last week, the five major deposit banks cut deposit rates, and earlier this week, the People's Bank of China lowered the short-term reverse repo rate, signaling a clear easing stance.

Recently, Tesla's strong stock performance has also boosted the domestic secondary battery sector, but unlike in April, the market is seeing a more diversified flow into semiconductors and cyclical stocks rather than concentration on specific stocks. Although foreign buying has slowed due to profit-taking from gains in the Korean won's value, the intensity is considered weak. Despite this week's market correction, positive outlooks remain for shipbuilding and equipment sectors that showed resilience, as well as industrials and materials sectors such as chemicals, machinery, and steel, which have been strong since June. Additionally, sectors like hotel leisure, cosmetics, and apparel, which have fallen excessively due to disappointment over China's reopening, also warrant attention.