Interest Rates or Earnings? Tug-of-War over the 7,000 Level Expected in Korean Stock Market [Good Morning Market]

Last week, the U.S. stock market in New York rose across the board on expectations of the reopening of the Strait of Hormuz and hopes for a diplomatic solution between the United States and Iran. However, this week, the Korean stock market is expected to see a tug-of-war over the 7,000-point level, depending on U.S. long-term interest rates as well as earnings and employment indicators.

On the 25th (local time), the Dow Jones Industrial Average closed at 51,828.62, up 478.64 points (0.93%) from the previous session. The S&P 500 Index gained 39.28 points (0.51%) to end at 7,743.41, while the tech-heavy Nasdaq Composite Index closed at 27,068.72, rising 129.34 points (0.48%).

Investor sentiment improved significantly as international oil prices fell by more than 2% amid progress in U.S.-Iran negotiations and expectations for the reopening of the Strait of Hormuz. Iranian Foreign Minister Abbas Araghchi stated during a press conference held on the sidelines of the United Nations General Assembly in New York that Iran had proposed a “7-day plan” to the United States, which centers on ending hostile actions and reopening the Strait of Hormuz.

November delivery West Texas Intermediate (WTI) crude fell $2.20 (2.33%) from the previous session to close at $92.41 per barrel, while November Brent crude dropped $2.28 (2.14%) to settle at $104.32 per barrel.

U.S. Treasury yields continued to surge during the session, but partially retreated as the decline in oil prices and optimism regarding U.S.-Iran negotiations were reflected. The 30-year U.S. Treasury yield hit 5.519% intraday, marking its highest level since June 14, 2004. The 10-year yield hovered around 5.20% but later dipped below the 5.20% mark during the afternoon session.

Attention is now focused on whether the upcoming releases of the August Personal Consumption Expenditures (PCE) Price Index, the August Job Openings and Labor Turnover Survey (JOLTS), and the September nonfarm payrolls report will curb the pace of interest rate hikes. Consensus for September nonfarm payroll additions stands at 100,000, indicating a slowdown from the previous month’s 162,000, which could help alleviate tightening concerns.

Artificial intelligence (AI)-related technology stocks stood out. Microsoft soared 3.66% after unveiling its new “Copilot,” which has evolved from a simple chatbot into a sophisticated AI agent. The Philadelphia Semiconductor Index also climbed 1.41%, while SK hynix ADR rose 2.78% and Apple closed up 1.53%.

The spread of the Agent AI narrative is driving a recovery in AI stocks’ leadership, as it leads to increased inference workloads, server expansion, and improved DRAM demand. Whether South Korea’s strong September export performance continues, comments about AI demand in the U.S. Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI), and Micron’s scheduled earnings announcement and next-quarter guidance on October 1 (Korea time), will all be key factors shaping the direction of Korea’s semiconductor stocks and the overall market.

Ji-Young Han, Research Analyst at Kiwoom Securities, said, “Although the stock market will continue to face uncertainty over rising U.S. long-term interest rates, the recovery of leadership among AI infrastructure stocks is expected to provide upward momentum. The volatility that could occur as the market digests the major domestic and external events concentrated at the end of the week—such as Micron’s earnings, exports, and employment data—should be seen as an opportunity to expand stock holdings.”

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