[Good Morning Market] Big Tech Earnings Strong, 15% Tariff Deal Brings Relief to Korean Stocks

Fed Keeps Rates Unchanged, Maintains Hawkish Stance
Korea-US Tariff Deal Reached, Avoiding Worst-Case 25%
Concerns Over Trade Balance Remain... "Focus Needed on Corporate Earnings"

Jerome Powell, Chair of the US Federal Reserve (Fed), maintained a hawkish stance by keeping the benchmark interest rate unchanged and describing the current monetary policy as "moderately restrictive." Meanwhile, big tech companies related to artificial intelligence (AI) reported solid earnings, and tariff negotiations between Korea and the United States reached a dramatic agreement at a 15% tariff rate. This is expected to have a positive impact on the Korean stock market.

On the 30th (local time), the S&P 500 closed at 6,362.92, down 0.12% from the previous day. The Dow Jones Industrial Average also fell by 0.38% to 44,461.28. In contrast, the tech-heavy Nasdaq index ended trading at 21,129.67, up 0.15%, buoyed by strong earnings announcements from big tech firms such as Microsoft (MS) and Meta.

Although the Fed maintained its hawkish stance, strong big tech earnings supported the US stock market. At the US Federal Open Market Committee (FOMC) meeting, the benchmark interest rate was held steady at 4.25?4.50%. This marks the fifth consecutive time the rate has been maintained since the start of the second Donald Trump administration.

At this FOMC meeting, nine members, including Chair Powell, voted in favor of keeping the rate unchanged. Board member Michelle Bowman and Vice Chair Christopher Waller cast dissenting votes, arguing for a 0.25 percentage point rate cut. This is the first time since 1993 that two Fed board members have simultaneously opposed an FOMC policy decision.

Powell stated, "The current rate is at a moderately restrictive level, and I do not see it as excessively constraining the US economy," adding, "Now is the time to continue monitoring the trajectory of major economic indicators." He also expressed concern that while the Trump administration's tariff policy may have only a limited short-term impact on prices, its ripple effects could last much longer than expected.

By company, MS reported strong results for the second quarter (fiscal fourth quarter), with both revenue and earnings per share (EPS) surpassing market expectations. Revenue reached $76.44 billion and EPS was $3.65, beating Wall Street’s average forecasts by 3.6% and 8.3%, respectively. The stock price surged by over 8% in after-hours trading. Meta also posted strong results, with its stock jumping by more than 11% in after-hours trading.

US President Donald Trump’s announcement of a 15% reciprocal tariff on Korea is also expected to have a positive effect on the Korean stock market. This is a significant reduction from the previous 25%, avoiding the worst-case scenario. Korea has agreed to invest a total of $350 billion in the US, including in automobiles, trucks, and agricultural products, and President Lee Jaemyung is scheduled to hold a summit meeting with President Trump at the White House within two weeks.

The MSCI Korea ETF, which shows a similar trend to the Korean stock market, rose by 0.26%. The Philadelphia Semiconductor Index also increased by 0.83%.

However, it is necessary to monitor the possibility of Korea’s trade balance worsening due to this tariff measure. Seo Sangyoung, a researcher at Mirae Asset Securities, explained, "In the short term, this is a positive result for the stock market, but rather than expecting a sustained rally, more attention should be paid to corporate earnings and key US economic indicators."