[Good Morning Market] U.S. Stocks Rally on Rate Cut Hopes... Korea Expected to Open Higher

On August 13, the Korean stock market is expected to open higher, influenced by a broad rally in the New York stock market driven by hopes for an interest rate cut.

Yonhap News Agency

On the 12th (local time), the Dow Jones Industrial Average closed at 44,458.61, up 483.52 points (1.10%) from the previous session. The large-cap S&P 500 index rose 72.31 points (1.13%) to 6,445.76, and the tech-heavy Nasdaq index surged 296.50 points (1.39%) to 21,681.90, both setting new record highs. The small- and mid-cap focused Russell 2000 index also jumped 2.99%, showing strong gains among small-cap stocks.

The July Consumer Price Index (CPI) release helped push the indices higher. According to the U.S. Department of Labor, the July CPI rose 2.7% year-on-year, below the market expectation of 2.8%. Notably, the core CPI, which excludes the volatile energy and food sectors, increased by 3.1% year-on-year and 0.3% from the previous month (2.9%), sending a signal that long-term inflation concerns may be easing.

This contributed to heightened expectations for a Federal Reserve (Fed) rate cut in September and improved investor sentiment. According to CME's FedWatch tool, the probability of a 0.25 percentage point rate cut at the September FOMC meeting rose to 94.4%, up from 85.9% the previous day. The likelihood of a total 0.50 percentage point cut by October and a total 0.75 percentage point cut by December also came into focus. U.S. President Donald Trump increased pressure on Fed Chair Jerome Powell by once again urging a rate cut immediately after the CPI release.

Tariff uncertainty has eased somewhat. President Trump signed an executive order the previous day extending high tariffs on Chinese goods for another 90 days. As a result, the U.S. will maintain a 30% tariff on Chinese products, and China will keep a 10% tariff on U.S. products for the time being.

By sector, small-cap stocks, which are expected to benefit from lower borrowing costs in the event of a rate cut, showed strength. Semiconductor stocks such as Broadcom (2.94%), Micron (3.26%), Qualcomm (3.89%), and Lam Research (3.22%) closed higher, reflecting both interest rate cut expectations and easing supply chain concerns. Major large-cap tech stocks like Microsoft (1.43%) and Meta (3.15%) also rose. The Philadelphia Semiconductor Index climbed 2.99% in line with the semiconductor sector rally.

The Korean stock market, which closed lower the previous day amid caution ahead of the U.S. CPI release, is expected to open higher today thanks to the positive momentum from the U.S. However, uncertainty over tax reform measures, such as the criteria for major shareholders subject to capital gains tax, is likely to persist. Han Jiyeong and Lee Sunghoon, researchers at Kiwoom Securities, commented, "With frequent changes in the outlook for major shareholder criteria for capital gains tax and other issues, the flow of news about tax reform will create varying levels of rebound momentum across sectors and individual stocks."