New York Stocks Decline Amid Rising Interest Rates and Oil Prices

Amid intensifying technological competition and supply chain instability, countries are moving to secure their own AI capabilities. In particular, the importance of building independent AI infrastructure is emphasized to prepare for potential disconnections with major tech powers like the U.S. and China. This is emerging as an essential survival strategy for national security and economic sustainability, beyond mere technological independence.

Nvidia CEO Jensen Huang strongly advocates for countries to build sovereign AI, contributing to global discussions aimed at reducing technological dependence on specific nations. This move is seen as an effort to secure a stable AI supply chain, similar to energy security, and it is considered crucial to possess AI capabilities that allow for autonomous operation.

The 10-year U.S. Treasury yield has surpassed 5% for the second time since the 2007 financial crisis. This has fueled inflation concerns in the market, with FedWatch indicating that the probability of a Federal Reserve (Fed) rate hike has risen to 90%. Rising oil prices and other inflationary pressures are leading to renewed calls for additional Fed rate hikes.

The market, paradoxically, suggests that a preemptive rate hike now, followed by a message of maintaining rates, is the best strategy to alleviate uncertainty and stabilize the market. This assessment is based on the judgment that the Fed can no longer afford to wait amid high inflationary pressures. While a rate hike might cause short-term market pain, there is some expectation that it will reduce policy uncertainty in the long run.

This is creating a new boom for the shipbuilding and engine manufacturing industries, with major global companies such as Hyundai Heavy Industries, Finland's Wärtsilä, and Germany's Everence undertaking large-scale expansions to produce ship engines for AI data centers.

Ship engines are also gaining popularity for large-scale power generation due to their high efficiency and stability. Notably, companies in the ultra-high voltage transmission sector, such as Hyosung Heavy Industries, are also experiencing a surge in order backlogs driven by demand for data center power infrastructure, creating positive ripple effects across related industries. This trend is expected to continue in line with the sustained growth of data centers.

This is due to shipowners' preference for the high stability and reliability of Korean engines, making it common for them to specify the use of Korean engines from the shipbuilding contract stage. While the Chinese shipbuilding industry has achieved quantitative growth, its core engine technology is still considered to lag behind Korea's.

Shipowners prioritize operational safety and efficiency, and by choosing time-tested Korean engines, they aim to minimize potential risks. This technological gap indicates that the Chinese shipbuilding industry needs to exert more effort in securing high-value core technologies, beyond merely building a large number of ships.

The primary reason for this upgrade is the deleveraging process that occurred during July and August, which is assessed to have significantly alleviated market leverage concerns. BlackRock determined that the issues of concern in the Korean market normalized after the summer, and the undervalued appeal of Korean stocks compared to the MSCI Emerging Markets Index also played a positive role in their analysis.

Market attention is focused on the anticipated conclusion of major companies' share buybacks between early and mid-October. There are conflicting outlooks on the impact of the end of share buybacks on the market. Some negative views express concern that the market could plummet once the defensive effect of share buybacks disappears.

Conversely, there are also positive forecasts that the market could gain upward momentum after the share buybacks end. The net buying trends of foreign and institutional investors around the time share buybacks conclude will likely be a crucial indicator for gauging the market's future direction.

The U.S. White House has emphasized balancing AI technological innovation with safety, clearly opposing broad immunity for AI companies. The Secretary of Commerce asserted that AI developers and companies must be accountable for the actions of their models and the damages they cause, demanding stronger legal liability for the AI industry.

The government is discussing regulations that focus on verifying corporate responsibility and managing systemic risks, rather than directly curbing development speed. This is interpreted as an effort to respect the autonomy of AI technological advancement while building safeguards against social repercussions and potential risks. The core is to establish clear accountability for damages caused by AI system malfunctions or biases.

This is an alternative demand that arose given the difficulty of retiring common shares due to limitations on Samsung Life and Samsung Fire & Marine Insurance's holdings of Samsung Electronics common shares under the Act on Structural Improvement of the Financial Industry.

Life Asset Management argues that buying back and retiring Samsung Electronics preferred shares is an efficient way to enhance shareholder value. However, concerns are also raised that stock price volatility could increase depending on market interest and the volume of circulating Samsung Electronics preferred shares.

Recent industry reports increasingly highlight a shortage in the telecommunications equipment industry. This reflects a situation where equipment supply cannot keep up with growing demand for 5G infrastructure expansion, as well as advancements in next-generation communication technologies like quantum and optical communication. Currently, the stock prices of telecom equipment-related companies are generally low, highlighting their investment appeal.

Analysis suggests that if the quantum and optical communication sectors become active, there is a high probability of sector rotation across the entire telecommunications equipment industry. However, in the event of a short-term stock price surge, whether these shortage issues can continue to be highlighted will be a crucial factor in maintaining future stock prices.

This is similar to trading volumes when the index maintained the 2,500 level, showing a contraction in market investor sentiment. Meanwhile, investor deposits, which once fell to KRW 93 trillion, have recently surged rapidly again to around KRW 106 trillion.

This phenomenon suggests that investors are increasing their cash assets and waiting until they can confirm major macroeconomic indicators such as the Federal Open Market Committee (FOMC) meeting results and interest rate decisions, rather than actively investing. It is interpreted as reflecting a psychology of maintaining a conservative investment strategy until uncertainties are resolved.

This is because the U.S. 10-year Treasury yield is fluctuating around 5%, and subsequent comments from the Federal Reserve (Fed) regarding future interest rate hikes are expected to significantly impact the market.

In particular, the question of whether interest rates will be raised and the market's reaction to it will be key factors determining the short-term stock price movements of the semiconductor sector.

While FedWatch indicates that the likelihood of an FOMC rate freeze is nearing 95%, some market participants express concern that a rate freeze could actually become a risk factor. There is a tendency among market participants to believe that an 'insurance' rate hike, even if small, would be better in the long run given persistent inflationary pressures.

Comparing past three rate cut periods with current CPI, some analysis suggests that an additional rate hike would not align with the Fed's existing policy stance. Nevertheless, voices advocating for preemptive rate hikes to resolve current uncertainties are growing louder in the market.

Interest is growing in sectors perceived as 'anti-Trump' in anticipation of former President Donald Trump's potential re-election. The secondary battery industry is particularly highlighted as a representative field within this trend. Samsung SDI is recommended as the top pick, with expectations of strong operating profit growth.

Samsung SDI has recently been rapidly narrowing the market share gap with LG Energy Solution and appears to be starting to overtake it. This demonstrates that the company is further strengthening its competitiveness in the secondary battery sector, driven by technological advancements and the growth of the global electric vehicle market.

Haesung DS continues full operation in its core automotive lead frame business, reporting solid performance. Company visits and conference calls confirm clear margin improvements in the substrate business, indicating overall enhanced profitability. These positive business results have led to buying interest from foreign investors.

Indeed, foreign investors have been observed consistently accumulating Haesung DS shares from the early 50,000 KRW range. This reflects foreign investors' positive outlook on Haesung DS's growth potential and robust business structure. With strong demand backing the company, expectations for future stock price movements are also rising.

The cloture vote for the 'Clarity Act,' a digital asset regulation bill, failed in the U.S. Senate. The bill garnered only 49 votes in favor, falling short of the 60 votes required for passage, thus failing to pass. However, Senator Tom Tillis reportedly voted against it not as a simple opposition, but to initiate a motion to reconsider, suggesting the bill's prospects are not entirely extinguished.

A motion to reconsider provides an opportunity to revisit a defeated bill. Senator Tillis's move indicates that the Clarity Act is not completely dead but may be rediscussed in the future. The digital asset industry remains keenly observant of the bill's fate despite its current rejection.

This attempt to enhance transparency, modeled on UK regulatory practices, reflects a commitment to address opaqueness in the cryptocurrency market.

The bill also included stricter ethical and financial restrictions than before, such as extending ethics limitations for public officials to their dependents and requiring divestment of holdings within 180 days. These provisions aim to promote the soundness of the digital asset market and reduce potential conflicts of interest.

It is widely believed that the Clarity Act will not pass the Senate this year. With the bill failing to pass before the midterm elections, there is speculation that it might be addressed during the lame-duck session after the elections. However, analysis suggests that this lame-duck session is physically only 18 days long, making it difficult to secure sufficient time for the bill's passage.

Therefore, the consensus is that the actual passage of the Clarity Act is likely to be postponed until the next session. This implies that uncertainty in the digital asset regulatory environment may persist for some time.

However, analysis suggests that his remarks hinted at a subtle relief over the possibility that internally unacceptable provisions might be removed. This stems from the fact that the bill was not completely discarded but has a chance to be revised through reconsideration.

Notably, Armstrong reportedly also expressed optimism about the 'GENIUS Act,' which is considered more favorable than the Clarity Act. This can be interpreted as a positive signal for new regulatory discussions that address the problems of the rejected bill and reflect industry opinions.

Procedural constraints dictate that only those who voted against the Clarity Act can request reconsideration. While a motion to reconsider can pass with a simple majority, if it proceeds to an actual vote, it would require 60 votes for passage, presenting a realistic hurdle. If an additional 10 or more votes cannot be secured overnight, the bill's passage will be difficult.

Considering the current situation in the U.S. Congress, a lack of physical time also makes the bill's passage challenging. With complex legislative procedures and diverse stakeholder interests involved, even if reconsideration passes, significant struggles are expected before the bill is finally enacted.

Arguments diverge regarding the fundamental drivers of stablecoin growth. Some point out that stablecoin growth is not solely determined by regulatory issues. Instead, analysis suggests that demand for stablecoins naturally increases as the on-chain ecosystem becomes more active.

In other words, legal clarity is merely an auxiliary means to enhance market stability, while the core growth factor lies in how vibrant blockchain-based on-chain activities become. The argument is that stablecoin demand does not first create the on-chain ecosystem; rather, the growth of the on-chain ecosystem drives stablecoin demand.