New York Stocks Turn Down Amid Rising Treasury Yields, Memory Stocks Rise Together

Walmart's Q2 comparable store sales increased by only 2.6% year-over-year. This figure fell short even of Bloomberg's lowest forecast, and sales growth excluding fuel sales showed the slowest increase in six years. Concerns about an overall consumption slowdown were reflected in the market, negatively affecting investor sentiment.

Market tensions are escalating as U.S. Treasury yields resume their upward trend. Despite Secretary Besant's Treasury buyback measures, yields rebounded, which is interpreted as a clear indication of the government's strong intention to suppress rising yields. This government intervention added uncertainty to the market.

AI startup Anthropic plans to submit its initial public offering (IPO) application this month and aims for an October listing. This schedule is somewhat earlier than previously expected, raising concerns that Anthropic's listing, like SpaceX's case, could significantly impact market supply and demand.

According to an analysis report on stock market volatility around the U.S. midterm elections, historical volatility has been observed from 75 days before to 25 days before the midterm elections. The market generally formed a bottom by mid-October and then rebounded. This serves as an important reference for investors to predict market movements before and after the elections.

Despite SK Hynix's decision to cancel treasury shares, opinions vary regarding future stock price prospects. Some market participants point out that U.S. investors' distrust of the memory industry cycle persists, and share buybacks alone have limitations in driving stock prices higher. Ultimately, proving the sustainability of earnings is considered a crucial prerequisite for the stock price to surpass its previous high.

The U.S. stock market's record high in August is analyzed to be primarily driven by the real policy rate entering negative territory. As the U.S. PC inflation rate (3.7%) announced at the end of July began to fall below the Fed's policy rate (3.75%), expectations spread for falling inflation, calming interest rate instability, and increased preference for risk assets. This served as an important basis for driving the stock market rally.

As the U.S. stock market continues to hit historic highs despite sustained high interest rates, the perception of interest rate thresholds is changing. Previously, the threshold for 10-year U.S. Treasury yields was considered 4.5% and for 30-year yields 5%. However, with the stock market showing strength even above these rates, there are arguments for adjusting the 10-year threshold to 5% and the 30-year threshold to 5.5%. It is expected that exceeding these new thresholds could have a certain impact on stock market declines.

During the U.S. Q2 earnings season, the earnings per share (EPS) growth rate of S&P 500 companies surged significantly. The year-over-year growth rate, estimated at 23.1% at the end of June, has now been revised upward to 50.4%. This is attributed to improved earnings primarily from growth stocks, leading to analysis that the U.S. stock market remains attractive in terms of valuation. However, the sustainability of this earnings improvement could act as a hurdle for further stock market gains.

Some argue that market adjustments related to the U.S. midterm elections have already been factored in. Past cases show that in midterm election years, stock prices tended to decline by about 9% from the beginning of the year, but the market adjustment in May-June this year is interpreted as having already pre-reflected these concerns. From this perspective, the market could gain upward momentum after the midterm elections, following the past pattern where stock prices in the third year of a presidency were the best.

As U.S. employment data shows signs of cooling, attention is focused on the direction of the Federal Reserve's monetary policy. The 3-month average of non-farm payrolls in July turned to a 50,000 decline, confirming a cooling trend in the labor market. This, along with falling inflation, suggests the Fed may avoid a negative direction in its monetary policy decisions, and the market is watching the Fed's next move.

Samsung Electronics' 150 trillion won shareholder return plan is currently known to be an estimate, not yet finalized. Some forecasts suggest it could reach up to 200 trillion won. These estimates are based on the principle of returning 50% of free cash flow to shareholders, and the final agenda is expected to be approved by the board of directors this month. Competition among companies for shareholder returns is cited as one of the backgrounds for these scale estimates.

Samsung Electronics and SK Hynix show different approaches to shareholder returns. Samsung Electronics tends to prefer dividends over share buybacks due to the shareholding burden of major shareholders like Samsung Life Insurance and Samsung Fire & Marine Insurance. Share buybacks increase the shareholding ratio of existing shareholders, but Samsung Life and Fire must avoid their shareholding ratio increasing due to regulations on affiliate shareholding.

In contrast, SK Hynix benefits from share buybacks to increase its shareholding ratio due to its structural characteristic where its holding company, SK Inc., must maintain at least a 20% shareholding. Theoretically, share buybacks are perceived to be more advantageous to shareholders than dividends due to tax issues, but the optimal method varies depending on the company's shareholding structure and regulatory environment.

These differences in shareholder return methods are deeply linked to each company's management strategy and governance structure, and investors should consider them when making investment decisions.

SK Hynix has a structure where increasing its shareholding ratio through share buybacks is advantageous, and this is perceived to be theoretically more beneficial to shareholders than dividends due to tax issues. Ultimately, each company's shareholder return method is determined by its individual shareholding structure and strategic judgment.

There's a key difference in how companies calculate bonuses versus shareholder returns. Bonuses are typically based on operating profit, while shareholder returns are based on free cash flow. This distinction means large capital expenditures affect these two metrics differently.

For example, building a factory for a mega-project involves massive capital outlay, but this isn't directly deducted from operating profit. Thus, even with significant capital investment, operating profit might remain stable, not affecting bonus payments.

However, capital expenditure costs are deducted from free cash flow. So, large capital investments can reduce free cash flow, potentially leading to lower shareholder returns. Investors need to understand these different calculation standards to comprehensively assess a company's financial health and shareholder return policies.

The forecast for electricity consumption in 2040 has been significantly revised upward compared to previous plans. According to the disclosed amendment to the 12th Basic Plan for Long-term Electricity Supply and Demand, electricity consumption in 2040 is expected to reach 847.3 TWh under the standard scenario. This represents a 27.5% increase from the 12th preliminary draft released in April, and a staggering 41.7% increase compared to the forecast in the 11th Basic Electricity Plan established two years ago.

This sharp increase in electricity consumption implies the need for an additional 20 GW of power generation capacity, rising from the initially projected 138 GW to 158 GW. 20 GW is equivalent to approximately 20 large nuclear power plants, suggesting an urgent need for massive expansion of generation facilities to ensure stable power supply in the future.

This upward revision of the forecast is attributed to factors driving a surge in electricity demand, such as industrial advancement and an increase in data centers. In-depth discussion and investment will be required for future energy policy formulation.

Skepticism has emerged that large-scale share buyback and cancellation policies do not necessarily lead to direct stock price increases. Examining the stock price reactions of large-cap stocks that conducted massive share buybacks and cancellations from 2022 to 2025 shows that the expected valuation re-rating did not result in dramatic surges. In fact, cases often fell short of market expectations.

This suggests that investors need to realistically adjust their expectations regarding the effectiveness of shareholder return policies. Especially for sectors highly influenced by fundamental industry cycles and corporate earnings, such as semiconductors, it is argued that the basic issue of industry improvement should be approached separately from shareholder return policies. It is time to focus on long-term corporate value enhancement factors rather than short-term share buyback effects.

Diesel crack spreads (refining margins) are soaring, approaching $90-100, raising inflation concerns. Even as West Texas Intermediate (WTI) crude oil prices remain around $88, the actual price consumers pay for diesel, which combines WTI price and refining margins, is between $170-180, almost $200. This indicates that rising costs in the refining process, beyond mere oil price fluctuations, are driving up actual felt inflation.

Many might think that stable oil prices mean everything is fine, but what we actually use are the prices of refined final products like diesel and gasoline, and these product prices are surging. This steep rise in diesel crack spreads can lead to increased transportation and logistics costs, contributing to overall inflationary pressure.

This phenomenon could worsen, especially with increased diesel demand due to rising winter heating needs. Therefore, continuous monitoring of not only oil prices but also refining margins is necessary.

This acts as an overall inflationary pressure, which can also affect central bank monetary policy.

Bitcoin's price correlation with gold reached its highest point during August, reaffirming Bitcoin's value as 'digital gold.' Conversely, it maintained a negative correlation with Nasdaq and Kospi, showing movement distinct from traditional financial markets. This suggests that Bitcoin is strengthening its safe-haven asset characteristics amid uncertain macroeconomic environments. Resolving uncertainty in the digital asset market is expected to be a key variable in Bitcoin's future scenario.

The U.S. Securities and Exchange Commission (SEC) has signaled an easing of regulations for digital asset businesses related to tokenized securities, which is expected to positively impact the digital asset market, including Ethereum. The SEC has set registration exemption conditions for annual transactions under 100 billion won, indicating a move to foster the related industry. This regulatory easing is anticipated to improve the liquidity and scalability of the Ethereum network and create a foundation for more institutional investors to participate in the digital asset market.

The U.S. Treasury's unusual announcement of Treasury buybacks on August 19, two weeks ahead of its regular quarterly release, shocked the market. This is interpreted as a policy signal to expand buybacks to $2-4 billion per transaction, reducing the supply of long-term Treasury bonds and suppressing long-term yield increases. This move by the Treasury is seen as a strong demonstration of its will to alleviate market anxiety and manage upward pressure on interest rates.

Hyper-scalers, big tech companies, have significantly increased their issuance of ultra-long-term bonds, contributing to upward pressure on long-term interest rates. This year, the top four big tech companies issued an astounding $200 billion in ultra-long-term bonds, with a sharp increase in the proportion of ultra-long maturities, such as 30-year bonds. This is creating upward pressure on overall interest rates within a limited long-term bond market demand and is analyzed to be a major factor in future market interest rate volatility.

This phenomenon is attributed to big tech companies preferring long-term bond issuance to stably secure large-scale investment funds for data center construction and other projects. However, this simultaneously causes an oversupply of long-term bonds in the market, paradoxically driving up long-term interest rates.

Investors need to closely monitor the impact of big tech companies' funding strategies on the overall bond market and interest rate direction.

Concerns are also being raised that this massive issuance of ultra-long-term bonds could particularly absorb demand from institutional investors, dampening demand for other bond investments.

A forecast suggests the U.S. Treasury will have no choice but to utilize the cryptocurrency market to resolve its concerns about absorbing Treasury bonds. The U.S. financial market is expected to attempt to absorb the crypto market on-chain, turning all participants into Treasury bond demanders. This indicates that the utility value of cryptocurrencies like Bitcoin is rising within the U.S. strategy to maintain dollar hegemony. This move is interpreted as foreshadowing a full-scale bullish reversal for Bitcoin and the cryptocurrency market after October.