U.S. stocks apparently strengthen Nasdaq on falling interest rates ahead of majo

U.S. stocks apparently strengthen Nasdaq on falling interest rates ahead of major events

The U.S. stock market started slightly higher ahead of major events such as the announcement of the FOMC and employment report, and the announcement of the results of major technology stocks. Although it was once weak due to the sale of some semiconductors, financial and energy industries, it expanded again with some technology stocks having high expectations for the earnings season. A fall in government bond rates also leads to improved investor sentiment. In particular, the Treasury Department's announcement of a reduction in government bond issuance in the first quarter also stimulated the decline in interest rates, expanding the gains ahead of the market's closing (Dow +0.59%, Nasdaq +1.12%, S&P 500 +0.76%, Russell 2000 +1.67% and Philadelphia Semiconductor Index +1.06%)

* Variables: Causes of falling interest rates and earnings season

Some technology stocks are strong in response to a drop in government bond rates. Government bond rates fall while waiting for ① FOMC ② Plans to issue Treasury bonds ③ Employment reports. At this FOMC, the Fed is likely to freeze interest rates and signal a rate cut in the future. The core PCE price index has fallen below 3% for the first time since March 2021, and further inflationary pressure is not high due to slowing employment.

In addition, the Treasury Department's plan to issue government bonds, which greatly increased the volatility of the bond market in July and October, is also a factor that lowers interest rates. The market is expected to issue government bonds in the second quarter, which will be announced on the 31st, less than last year. In particular, the fact that the U.S. Treasury Department announced the issuance of government bonds in the first quarter, which was announced on October 30, at $760 billion, which is less than planned, is also a factor that lowers interest rates. In addition, the ISM manufacturing index, which will be released on the 1st, and the employment report, which will be released on the 2nd, are expected to slow down gradually. As such, major events are stimulating interest rates to fall, the stock market is solid, led by technology stocks.

Meanwhile, it is also noteworthy that many companies, including large technology stocks, are set to announce their earnings this week. Until last week, 25% of S&P 500 companies reported their earnings, but the operating profit surprise rate was only 69%. At the end of September last year, it predicted that fourth-quarter earnings would increase 8% year-on-year, but reflecting last week's earnings announcement, a 1.4% decrease year-on-year also stimulated earnings concerns

However, according to FactSet, operating profit of M7 stocks is expected to surge 53.7 percent year-on-year in the fourth quarter, excluding Tesla, which has already announced its results. In particular, four stocks, Amazon, Alphabet, Meta, and Nvidia, are expected to grow 79.7 percent year-on-year in the first quarter of 2024. The results of these stocks, which account for a high proportion of market capitalization, are expected to lead to increased volatility in the stocks and indexes.

* Features: Small and medium-sized AI, electric vehicle-related stocks are strong

Tesla (+4.19 percent) fell sharply recently due to sluggish performance and prospects. However, today's figure rose after mentioning the purchase of AMD (+0.33 percent). With more than 500 million dollars in chip purchases from Nvidia (+2.35 percent), the company said it would expand its chip purchase to AMD, which is interpreted as an aggressive investment in the AI industry. The semiconductor industry has been selling due to the rise, but amid strong performance due to news and falling interest rates on government bonds, small and medium-sized AI-related stocks such as Marvell Tech (+3.09%), Super Micro (+4.54%), UI Pass (+6.38 percent), Palantir (+4.53%) and C3.AI (+3.74 percent) are clearly strong

Tesla's sharp decline has been weakening the electric vehicle industry, but today it surged after not only Tesla but also Lucid (+27.17%) signed a contract to supply high-quality aluminum panels from Saudi Arabia Mining. The market assessed that the contract partially eased bankruptcy concerns. Apple fell and Rivian rose on the news that an executive in charge of Apple (-0.36%) had moved to Rivian (+5.43%). Due to this news, electric vehicle-related stocks such as QuantumScape (+8.30%) and Blink Charging (+7.29%) rose together

Data provider ZoomInfo (+6.11 percent) rose on BoA analysis, which raised its investment opinion to buy, saying its new AI products will drive accelerated earnings improvement. Western Digital (+2.61%) rose on news that it will resume discussions on a merger between Japan's Kioxia Holdings. iRobot plunged as Amazon (+1.34 percent) announced it would not proceed with its acquisition plan due to the unlikely approval of iRobot (-8.77 percent) regulators, while Amazon rose. SoFi Tech (+20.21 percent), a financial services company, jumped on the back of better-than-expected earnings results.

* South Korean stocks: Semiconductor, electric vehicle-related stocks watch

The MSCI Korea Index ETF rose 1.11 percent, but the MSCI Emerging Index ETF rose just 0.05 percent. The Philadelphia Semiconductor Index rose 1.06 percent and the Russell 2000 index rose 1.67 percent. The Dow transport index rose 0.21 percent, while overnight futures rose 0.09 percent. Reflecting this, South Korean stocks are expected to start around 0.5 percent higher. The one-month NDF dollar/won exchange rate is expected to fall 6 won to 1,332 won.

The previous day, Korean stocks rose on the back of slowing U.S. inflation and solid consumer spending amid a lack of momentum. In particular, foreigners' increased net buying led by Samsung Electronics and institutions' active net buying by financial stocks are favorable. KOSDAQ closed down more than 2 percent, led by secondary battery and semiconductor stocks. The solid rise in Nasdaq last night was positive for Korean stocks. In particular, investor sentiment in related stocks is expected to be solid on the Korean stock market due to the strong performance of AI and electric vehicle stocks.

* FICC: Natural gas plunges

International oil prices fell as the U.S.-Iran conflict is unlikely to escalate despite attacks on the U.S. military base in Jordan. Expectations for an agreement on the release of hostages also contributed to the drop in most energy items including natural gas and gasoline. Natural gas, in particular, plunged more than 8 percent due to a drop in demand due to mild weather and a halt in production of Freeport LNG

Gold rose on higher preference for safe-haven assets as interest rates on government bonds fall and risks in the Middle East rose. Nonferrous metals were mixed, with copper turning higher after a weaker start on Evergrande Group liquidation issues, but aluminium and zinc fell. Wheat fell on news that Argentina's wheat crop rose 25% year-on-year and favorable weather conditions in South America could allow continued harvest increases in the future. Soybean and other crops also fell.

The dollar strengthened against other exchange rates due to the solidity of the U.S. economy ahead of the FOMC and the retreat of expectations for a rate cut in March. In addition, the U.S. military's death in Jordan strengthened the preference for safe assets, and the dollar and yen continued to strengthen. However, the dollar strengthened as the Treasury Department reduced its plan to issue bonds in the first quarter ahead of the market's closing

Government bond yields fall ahead of the release of key economic indicators such as the FOMC and employment reports. Interest rates have fallen, although the possibility of an early rate cut is weakening despite continued slowdown in inflation, which is estimated to be due to some reversible inflows following the recent rise and the possibility of expanding risks in the Middle East. Amid expectations of a reduction in bond issuance plans in the second quarter, interest rates have increased after announcing a reduction in bond issuance plans in the first quarter

01/30 Overseas Financial Markets

◆ the U.S. stock market
- - DOW: 38,333.45p (+224.02p, +0.59%)
- - S&P500: 4,927.93p (+36.96p, +0.76%)
- - NASDAQ: 15,628.04p (+172.68p, +1.12%)
- Russell 2000: 2,011.42p (+33.09p, +1.67%)

◆ Related to Korea
- MSCI Korea Index ETF: $60.16 (+0.66, +1.11%)
- MSCI Emerging Index ETF: $38.91 (+0.02, +0.05%)
- - Eurex kospi 200: 339.55p (+0.30p, +0.09%)
- NDF exchange rate (1 month): KRW 1,331.95 / expected to start 5 won lower than the previous day
- Philadelphia Semiconductors: 4,388.28 (+46.17, +1.06%)

◆ the foreign exchange market
- Dollar Index: 103.496 (+0.063, +0.06%)
- EUR/USD: 1.0831 (-0.0022, -0.20%)
- Dollar/yen: 147.54 (-0.61, -0.41%)
- Pound/dollar: 1.2709 (+0.0006, +0.05%)

◆ the U.S. government bond market
- 2-year: 4.3159% (-3.3bp)
- 5-year: 3.9861% (-5.1 bp)
- 10-year: 4.0778% (-6.0bp)
- 30-year: 4.3194% (-4.9bp)
- 10Y-2Y: -23.81 bp (2.65 bp inversion magnification)
(Gift for government bonds)
- - 2YR T-Notes: 102*21   (+0*03 , +0.1%)
- - 5YR T-Notes: 107*30   (+0*10 1/4, +0.3%)
- - 10YR T-Notes: 111*16 1/2 (+0*18 1/2, +0.52%)
- - US T-Bonds: 120*17   (+1*3 , +0.91%)
- - Ultra US T-Bonds: 126*22   (+1*12 , +1.1%)

◆ Commodity Market ($, sweet grain, copper cent)
- - WTI: 76.78 (-0.97, -1.24%)
- Brent crude: 82.40 (-0.95, -1.14%)
- Gold: 2,044.60 (+13.70, +0.67%)
- Silver: 23.25 (+0.43, +1.87%)
- Zinc (LME, 3M): 2,552.00 (-25.50, -0.99%)
- Copper: 387.90 (+3.25, +0.84%)
- Corn: 440.25 (-6.50, -1.46%)
- Wheat: 593.50 (-5.75, -0.96%)
- Soybean: 1,194.25 (-15.75, -1.30%)