[Good Morning Market] KOSPI Lacks Direction... Growth Stocks Lead Gains

On September 5, the KOSPI is expected to trade without a clear direction amid a wait-and-see approach from investors.

The previous day, on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 45,621.29, up 350.06 points (0.77%) from the previous session. The S&P 500 rose by 53.82 points (0.83%) to 6,502.08, and the Nasdaq Composite climbed 209.97 points (0.98%) to finish at 21,707.69.

On this day, all three major U.S. indices closed higher as expectations for a rate cut grew due to signs of a slowdown in employment data. Following the previous day’s Job Openings and Labor Turnover Survey (JOLTS), which showed a decline in job openings, the ADP private employment report released that day also fell short of market expectations. In addition, weekly initial jobless claims exceeded forecasts, further confirming the trend of weakening employment.

As a result, expectations for a rate cut by the U.S. Federal Reserve strengthened, sending the yield on the 10-year U.S. Treasury note down by 5 basis points (1bp = 0.01 percentage point) to 4.15%. According to the Chicago Mercantile Exchange (CME) FedWatch, the probability of a 25bp cut in September was reflected at 99.4%, with an additional cut in October at 55.3%.

However, the market is interpreting the employment slowdown not as a sign of recession, but as a cooling of an overheated economy. The Institute for Supply Management (ISM) Services Purchasing Managers’ Index (PMI) for August, also released on the same day, came in at 52.0, beating the market expectation of 51.0 and marking three consecutive months of expansion. In particular, the sharp increase in new orders (from 50.3 to 56.0) was seen as a positive factor. As consumption accounts for about 70% of U.S. GDP, the expansion of the service sector is considered a mitigating factor for concerns about economic slowdown.

Market attention is now focused on the August nonfarm payrolls report. After that, inflation indicators such as the Producer Price Index (PPI) on the 10th and the Consumer Price Index (CPI) on the 11th are scheduled to be released, raising the possibility of increased market volatility ahead of the Federal Open Market Committee (FOMC) meeting on the 18th.

Investor sentiment related to artificial intelligence (AI) is also emerging as a key driver of market direction. Broadcom’s third-quarter earnings, announced after the market closed, showed revenue of $15.96 billion, exceeding the market forecast of $15.83 billion. Fourth-quarter revenue guidance was also above expectations at $17.4 billion versus the forecast of $17.0 billion. Notably, AI-related revenue surged 63% year-on-year to $5.2 billion, and the announcement of a new $1 billion contract sent the stock up 4% in after-hours trading.

On this day, the domestic stock market is expected to remain range-bound ahead of the nonfarm payrolls release, but growth stocks are likely to continue to outperform on the back of rate cut expectations.

Lee Sunghoon, a researcher at Kiwoom Securities, said, "It is worth paying attention to the KOSDAQ, bio, and secondary battery sectors, which are expected to benefit from falling interest rates." He added, "Compared to the beginning of the year, the KOSPI has risen 33.4%, while the KOSDAQ has only gained 18.7%, showing somewhat limited rebound momentum." He continued, "By sector, healthcare, chemicals, and IT home appliances have underperformed the index, so expectations for a rate cut could serve as a catalyst for a rebound in these sectors going forward."