[Good Morning Market] Growing Expectations for US Rate Cut: "Watch Beneficiary Stocks"

On September 9, the domestic stock market is expected to open higher, driven by optimism over a potential interest rate cut in the United States and the strength of technology stocks. However, concerns about job instability and a wait-and-see attitude regarding inflation indices are likely to limit the market's upward momentum.

Previously, on September 8 (local time), the New York stock market closed higher across the board as expectations for a Federal Reserve interest rate cut in September grew following unstable employment data. The blue-chip Dow Jones Industrial Average rose 114.09 points (0.25%) to close at 45,514.95, the large-cap S&P 500 Index gained 13.65 points (0.21%) to 6,495.15, and the tech-heavy Nasdaq Index jumped 98.311 points (0.45%) to finish at 21,798.699.

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The market is closely watching whether the interest rate cut anticipated at next week’s Federal Open Market Committee (FOMC) meeting will translate into further stock gains. This caution stems from the fact that previous Fed rate cut cycles (such as in 2000, 2008, and 2020) coincided with periods of economic recession in the United States. There are concerns that rate cuts implemented to address recessions could lead to sharp declines in the stock market, as seen in the past.

Han Ji-young, a researcher at Kiwoom Securities, commented, "Apart from the employment shock in August, there are not yet strong signs of economic cooling or an imminent recession," adding, "Although it may be difficult to expect double-digit stock price gains from this rate cut cycle, the market is likely to view the move as an insurance-type rate cut aimed at preventing a recession."

The domestic stock market is also expected to be influenced by the outcome of the FOMC, with immediate momentum coming from expectations of a US interest rate cut and the strength in technology stocks. The Research Division at iM Securities noted, "Assuming the rate cut trend continues, it is important to pay attention to sectors that benefit from lower interest rates," and added, "Semiconductor-related sectors could also see limited strength following Broadcom's 3.21% rise, so they warrant attention."

A researcher explained, "Ongoing concerns about US job instability and a wait-and-see approach to inflation indices are likely to cap the market’s upside," and predicted, "With individual drivers such as Broadcom momentum (materials, components, equipment) and the compromise on tax reform (securities, holding companies, etc.), sector rotation is expected to play out during the trading session."

On September 10, the US Producer Price Index (PPI) for August will be released, followed by the Consumer Price Index (CPI) for August on September 11.