[Good Morning Stock Market] "US Starts Interest Rate Cuts... KOSPI Focuses on Bio and Finance Stocks"

Regarding the Fed's 'big cut' in interest rates, securities analysts emphasize the need to pay attention to large-scale net selling by foreign investors centered on semiconductors and the shift of leading stocks in the domestic stock market.

On the 18th (local time), a trader is working at the New York Stock Exchange (NYSE). [Image source=Reuters Yonhap News]

On the 18th (local time), the Federal Reserve held a Federal Open Market Committee (FOMC) meeting and decided to lower the upper limit of the benchmark interest rate from 5.5% to 5.0%, a 50 basis point (1bp=0.01 percentage point) cut. The US stock market, which had maintained a strong trend during the Chuseok holiday, showed a sharp rise immediately after the rate cut announcement but most major indices gave back their gains and closed flat or down as time passed.

Accordingly, on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 41,503.10, down 103.08 points (0.25%) from the previous session. The S&P 500 index fell 16.32 points (0.29%) to 5,618.26 compared to the previous session, and the tech-heavy Nasdaq index closed at 17,573.30, down 54.76 points (0.31%).

Lee Kyung-min, a researcher at Daishin Securities, explained, "The key after entering the rate cut cycle is whether the current economy heads into a recession or achieves a soft landing." He added, "At this point, the possibility of a soft landing is considered high," and analyzed, "The Fed proactively implemented the big cut prioritizing risks amid visible economic slowdown and weak employment."

However, he added, "In a situation where distrust of the economy and fear of recession remain, time is needed to verify the US economy."

In the domestic stock market, there seems to be a need to consider the next leading stocks to replace semiconductors. Na Jung-hwan, a researcher at NH Investment & Securities, said, "During the Chuseok holiday, some large tech stocks such as Apple and Nvidia in the US stock market showed weak performance due to profit-taking selling," and explained, "Apple's stock fell as market forecasts suggested that demand for the iPhone 16 was not as strong as expected." He also noted, "It is necessary to keep in mind the possibility that domestic tech stocks may continue a short-term weak trend."

Han Ji-young and Lee Sung-hoon, researchers at Kiwoom Securities, said, "In the domestic stock market, foreign investors continue concentrated net selling centered on semiconductors," and analyzed, "In the Fed's rate cut phase, it is appropriate to respond with a combination of growth stocks and dividend stocks that have improved earnings outlooks, such as bio (most preferred) and finance (second preferred)."

They added, "AI hardware stocks like Nvidia, which were leading stocks this year, seem to have reached their limit in maintaining their status as leaders since summer," emphasizing, "As confirmed in the outlook and evaluation of companies utilizing AI such as Microsoft (MS), Alphabet, and Amazon, the AI cycle is ongoing."

Furthermore, they said, "It is appropriate to reduce the proportion of AI hardware, but it is advisable to maintain the market weight of IT sectors such as AI software and handsets."