[Good Morning Market] Nvidia Earnings Impact... KOSPI Expected to Open Lower

On August 28, the KOSPI is expected to open lower, influenced by the earnings results of Nvidia in the United States.

On the previous day, the Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 45,565.23, up 147.16 points (0.32%) from the previous session. The S&P 500 index rose by 15.46 points (0.24%) to 6,481.40, and the Nasdaq Composite advanced by 45.87 points (0.21%) to end at 21,590.14.

On this day, the New York stock market closed higher, reflecting Nvidia's earnings announcement and expectations for a rate cut, despite issues such as the dismissal of Federal Reserve (Fed) Governor Lisa Cook and President Trump's attempts to assert control over the Fed. Amid ongoing political pressure on the Fed, Treasury Secretary Scott Besant stated, "The nomination of the next Fed chair is likely to take place around the fall," further boosting market expectations for a rate cut.

John Williams, President of the Federal Reserve Bank of New York, also mentioned that "a rate cut is possible depending on the data." According to the CME FedWatch Tool, the probability of a 25 basis point (0.25 percentage point) rate cut at the September Federal Open Market Committee (FOMC) meeting stands at 88.7%, creating an atmosphere of near certainty. As a result, the market is expected to focus on major upcoming events, starting with the Personal Consumption Expenditures (PCE) price index to be announced on August 29, followed by non-farm payrolls (September 5), the Consumer Price Index (CPI, September 11), and the FOMC meeting (September 18).

Nvidia reported revenue of $46.74 billion and earnings per share (EPS) of $1.05 for the second quarter of its fiscal year, surpassing market expectations. Its gross margin remained robust at 72.3%, and the third-quarter revenue guidance ($54 billion) and margin (73.0-74.0%) also exceeded market forecasts. However, data center revenue reached $41.1 billion, falling short of the consensus estimate of $41.3 billion, and concerns were raised about a slowdown in exports to China. As a result, Nvidia's stock price fell by approximately 3% in after-hours trading. This is interpreted as a result of profit-taking following heightened expectations.

In the domestic stock market, despite the issue of Lisa Cook's dismissal the previous day, investor sentiment was dominated by anticipation for Nvidia's earnings announcement, leaving the market largely unchanged (KOSPI +0.25%, KOSDAQ +0.01%). However, the shipbuilding sector showed strength due to factors such as the MASGA (Make American Shipbuilding Great Again) project, expectations for orders from Canada, and news of a merger among HD Hyundai Heavy Industries affiliates.

Lee Sunghoon, a researcher at Kiwoom Securities, stated, "Today, the domestic stock market is expected to start weak, particularly among semiconductor and artificial intelligence (AI)-related stocks, reflecting Nvidia's decline in after-hours trading. However, the index is still likely to remain within a limited range, and sector rotation trading is expected to continue."

He added, "In particular, since the Russell 2000 index has rebounded in the U.S. market amid expectations for a rate cut, there is a high possibility of short-term capital inflows into small- and mid-cap stocks and growth stocks in Korea that are expected to benefit from a rate cut."