[Good Morning Market] Powell's Remarks Expected to Lead Korean Stocks Lower at the Open

Focus on Semiconductor Supply and Demand Volatility

On September 24, the Korean stock market is expected to open lower, reflecting a correction in the United States that was centered on artificial intelligence (AI) and growth stocks. The previous day, comments from Jerome Powell, Chair of the Federal Reserve, regarding the "overvaluation of the stock market" led to increased profit-taking in the New York stock market, which is likely to weigh on domestic investor sentiment as well.

On September 23 (local time), all major U.S. stock indices closed lower. The Dow Jones Industrial Average fell by 88.76 points (0.19%) to close at 46,292.78. The S&P 500 Index dropped by 36.83 points (0.55%) to 6,656.92. The technology-heavy Nasdaq Index declined by 215.50 points (0.95%) to 22,573.47. The Russell 2000 Index, which focuses on small- and mid-cap stocks, also fell by 0.24%.

The main factor dampening investor sentiment was Chair Powell’s remarks the previous day. He stated that "the stock market is significantly overvalued" and emphasized the uncertainty surrounding the future path of interest rate cuts. Other Federal Reserve officials also focused more on concerns about the economy rather than making statements that would increase expectations for rate cuts. This partially dampened hopes for an additional rate cut in October and cooled the market.

This pulled down technology stocks, which had soared amid the AI boom. Nvidia fell by 2.82% just one day after announcing a $100 billion investment in OpenAI to build large-scale data centers and acquire equity. Analysts noted that concerns about the AI investment frenzy resembling the dot-com bubble led to profit-taking. Most AI server and service companies, including CoreWeave (-1.76%), Marvell Technology (-1.20%), UiPath (-4.64%), and C3AI (-2.11%), also declined.

Political uncertainty also contributed to market pressure. If the U.S. Congress fails to reach a budget agreement, there is a growing possibility that a federal government shutdown will become a reality after September 30. Negotiations have been further complicated as President Donald Trump canceled a scheduled meeting with senior Democratic officials this week.

The market is also closely monitoring upcoming economic indicators. In particular, the Personal Consumption Expenditures (PCE) Price Index for August, to be released on September 26, is a key variable that could significantly influence the Federal Reserve’s next decisions. The core PCE is expected to rise by 0.2% month-on-month, slowing from July’s 0.3%, but concerns about inflationary pressures persist.

The previous day, the Korean stock market, which had shown strength led by semiconductor stocks such as Samsung Electronics (1.4%) and SK Hynix (2.9%) on the back of positive news from Nvidia and Apple, is expected to open lower due to the U.S.-driven correction and profit-taking pressure. After the initial drop, sector rotation among individual industries is likely to emerge. In particular, attention will focus on short-term supply and demand changes in semiconductor stocks.

Han Jiyoung and Lee Sunghoon, researchers at Kiwoom Securities, explained, "Recently, there has been a deepening concentration of foreign and institutional demand in the domestic semiconductor sector. The after-hours strength in Micron’s share price could trigger temporary volatility in the supply and demand of domestic semiconductor stocks, so caution is warranted."

They added, "In this process, it is appropriate to consider the possibility of a rotational market where capital shifts to other major sectors such as shipbuilding, defense, and finance during the trading session."