New York Stock Market Rebounds as Treasury Yields Stabilize

Data center construction accounts for approximately 10% of private non-residential construction spending, leading to an increase in construction job openings and voluntary quits. This indicates that people are working multiple jobs, and data center construction is a major factor sustaining the economy while other economic indicators are slowing down. Against this backdrop, arguments have been raised that the Federal Reserve's (Fed) continued stance on interest rate hikes is inappropriate. With ISM manufacturing and employment indicators showing a slowdown, concerns are growing that the foundation supporting the economy could be shaken.

SK Hynix's IPO funds of 29 billion dollars flowed into Korea, affecting the foreign exchange market. Korean foreign exchange authorities have a mechanism to intervene in the market by selling dollars and buying won when the exchange rate surges. This is how the foreign exchange authorities use the Foreign Exchange Equalization Fund, etc., to manage market volatility. The Foreign Exchange Equalization Fund, which was 135 trillion won last year, has decreased to 106 trillion won this year. Since the domestic foreign exchange market is closer to a domestic currency market than a fully open convertible currency market, it is analyzed that if the Ministry of Economy and Finance and the Bank of Korea manage the foreign exchange fund to directly handle a certain amount of dollars, it can be done without significant market shock. This intervention is possible due to the characteristics of the domestic foreign exchange market and can be seen as an effort by the authorities to minimize its impact on the market.

Broadcom's stock fell by approximately 3.5% in after-hours trading following its earnings release. This is attributed to guidance that fell short of market expectations. However, Broadcom set a target to double its AI semiconductor revenue by fiscal year 2026, maintaining expectations for future AI sector growth. The market is seeing differences in stock price volatility between the hardware and software sectors. After the earnings release, the stock price initially declined but soon showed signs of a rebound.

John Williams, President of the New York Federal Reserve, stated that the recent rise in interest rates is due to a strong economic situation, not inflation. He maintained his previous stance that inflation is on a downward trend. These remarks help alleviate some market concerns about rising interest rates. However, this interpretation can be received differently by various market participants.

Security-related software stocks such as Palo Alto Networks have recently experienced stock price declines. The market is applying harsher valuation standards to these companies. For example, Cloudflare's valuation once exceeded 100 times. The market is demanding accelerated growth from software companies that have already seen high stock price increases, and if they fail to meet these expectations, their stock prices are pressured. This phenomenon is observed across the entire software sector.

At the time, the CEO's conservative remarks and unclear guidance disappointed the market and were cited as the cause of the stock price decline. As there was also disappointment regarding the guidance in this earnings release, the market is scrutinizing Broadcom's announcement even more closely. This past experience shows that not only a company's earnings figures but also management's comments and future outlook significantly impact stock prices.

Last August, Korea's KOSPI index recorded a 3.4% increase. The U.S. S&P 500 index saw a gain of over 2%, and the Nasdaq Composite index rose by 3.9%, showing the highest increase. This indicates that global stock markets generally performed well. In particular, the tech-heavy Nasdaq rose significantly, showing a recovery in market investment sentiment.

The KOSPI's Price-to-Earnings Ratio (PER) has fallen to 5.1 times, reaching a historically low level. This figure could theoretically appear as a very attractive investment opportunity. However, market investor sentiment remains subdued, and investors are not actively buying. A series of downward target price reports are being released, further eroding investor confidence. Despite the undervalued market situation, overall economic uncertainty and negative reports are influencing investor sentiment.

The current high-interest rate stance is evaluated as a return from an abnormal state to a normal stage. In the U.S., large-scale investments in the AI industry are driving the economy, while in Europe, infrastructure and defense industry investments are supporting economic growth. Within this government-led capitalist investment trend, a structure where high interest rates are maintained is being formed. In a new paradigm different from the past, the market is adapting to high interest rates and finding growth drivers. A thorough analysis of the changing investment environment is necessary.

In particular, whether the Clarity Act passes by September 15th is expected to significantly impact the market. As a result, the market may see a rather unexciting trend until September 15th. Additionally, the domestic stock market is expected to trade within a box range around the Chuseok holiday. Investors need to monitor these key variables and formulate cautious response strategies.

This amount is larger than during the 2008 financial crisis or the 2021 inflation period. Especially, the occurrence of such a large-scale capital outflow during an economic boom, which is unusual, has significantly shocked the market. According to new securities analysis, this phenomenon reflects a change in foreign investors' sentiment towards the domestic stock market. Given that capital outflow occurred during a boom rather than a crisis, market participants are conducting in-depth analyses of its causes and ripple effects.

Yamaguchi Financial Group showed a move to sell long-term government bonds and replace them with short-term bonds. This move could lead to increased volatility in the Japanese government bond market. The market raises concerns that this phenomenon could lead to the unwinding of 'yen-carry trade' funds, which in the past borrowed low-interest yen to invest in high-interest overseas assets. The unwinding of yen-carry funds could dampen global risk asset investment sentiment and reduce liquidity.

Market experts anticipate that the U.S. Treasury will not allow a major market shock to persist ahead of the upcoming election. Analysis suggests the Treasury may intervene to stabilize the market. Therefore, negative opinions are prevalent regarding extreme predictions of a market crash within this year. The prevailing view is that the Treasury's potential policy interventions and the political situation ahead of the election will contribute to market stability.

Samsung Electro-Mechanics recently showed relatively strong performance despite an excessively sharp decline. Generally, stocks with large drops tend to show weaker performance, but Samsung Electro-Mechanics displayed a different trend. Within the semiconductor SoBuJang (materials, components, equipment) sector, a rotational rally is observed among individual stocks. This means that various stocks within the industry take turns moving, rather than a concentration on specific stocks. Market participants are seeking investment opportunities within this rotational rally.

The increase in demand for AI servers due to advancements in AI technology is directly linked to an increase in demand for AI data centers. This trend leads to a simultaneous rise in the utility and power equipment sectors. This is because massive power infrastructure is essential for building and operating AI data centers. Therefore, the expansion of AI infrastructure drives the growth of related power equipment industries, causing a complex sector rotation phenomenon.

After Snowflake released its earnings, its stock price fell by 4% in the after-hours market but ultimately closed up 22%. This dramatic rebound suggests the possibility of a rotational rally spreading across the entire AI software sector. Snowflake's case shows that the market still has high expectations for the growth potential of AI software companies. Therefore, there is an outlook that investment sentiment could spread to AI software-related stocks in the future.

Currently, the market lacks sufficient trading volume, making it difficult for multiple industries to rise simultaneously. The limitation in trading volume triggers industry-specific rotation, with day trading focusing on specific theme stocks becoming prominent. Steel and inter-Korean theme stocks are particularly at the center of this day trading. As the movement of large-cap stocks slows down and foreign investors continue to sell semiconductors, the market appears to be shifting into a trading-focused environment. Investors are increasingly pursuing profits through short-term trading strategies. This reflects the market's characteristic driven by insufficient trading volume.

Daeduck Electronics is currently moving away from a downward trend, with expectations for a trend reversal forming. According to technical analysis, if the stock price falls to around the early 100,000 won level and a support line is confirmed, a box trading strategy—buying in that range and selling at the upper line—is possible. This strategy is suitable for seeking stable returns in a volatile market. If one prefers not to trade in uncertain positions, a breakout trading strategy can be considered, buying when the stock price breaks above the upper resistance line. If it breaks above, there could be additional upside potential to 140,000 to 150,000 won. Investors can choose one of the two strategies to respond, depending on their own tendencies.

This project utilizes the city's idle coal-fired power plants, offering advantageous conditions for power supply. GS E&C aims to start construction in November and plans to complete the 1.2GW data center by 2028. This is a massive project with construction costs exceeding 10 trillion won alone. Expectations are rising for stable future profits not only from construction margins but also from data center rental income. This is seen as part of GS E&C's strategy to expand beyond the construction industry into new high-value-added businesses.

Some even feared it would surpass 5%. However, the yield has now eased to around 4.77%, showing signs of stabilization. Interest rates are likened to the 'gravity of asset markets,' and a decline in rates alleviates downward pressure on the market and acts as a key factor for a stock market rebound. Stabilized Treasury yields can improve investor sentiment and positively influence stock market recovery.

Market attention is focused on the U.S.-China summit scheduled for September 24th, the first day of the Chuseok holiday. It is expected that both China and the U.S. will engage in more aggressive media play until mid-September, just before the summit. In this process, the intensity of rhetoric between the two countries may increase, leading to heightened market volatility. However, some analyses suggest that drastic measures like tariff increases are unlikely to be implemented, as they could burden both sides given current inflationary pressures. Investors need to keep a close eye on news related to the U.S.-China summit and statements from both governments.

Ahead of the upcoming midterm elections, former President Donald Trump needs to address negative external issues such as interest rates, trade variables with China, and inflationary pressures from tariffs. This can be seen as a strategy to gain an advantageous position in the election. Against this backdrop, market volatility may increase throughout September, but expectations are building for a stock market recovery starting in October. If key external variables are resolved and political uncertainty is alleviated, it could positively impact the market.

For conservative investors, a diversified investment strategy is recommended, mixing dividend growth ETFs like 'Tiger US Dividend Dow Jones' with 'US High Dividend Active' ETFs. This approach aims for both stable dividend income and capital growth. Conversely, aggressive investors can consider a strategy to maximize income by combining Nasdaq Covered Call ETFs with active high-dividend stocks. Such portfolio construction can be flexibly applied according to individual investment tendencies and goals. Investors can utilize ETF simulation websites to build a portfolio suitable for them and forecast its performance.