After the second-longest Chuseok holiday on record ends, the domestic stock market will reopen in 8 days. Before the holiday began, the KOSPI hit an all-time high both intraday and at the close. As U.S. stocks climbed further while the domestic market was closed, a favorable mood is likely to continue for the time being.
From the 2nd to the 8th (local time), the S&P 500 rose 38.37 points (0.5%) from 6,715.35 to 6,753.72, the Nasdaq gained 199.33 points (0.8%) from 22,844.05 to 23,043.38, and the Dow Jones Industrial Average added 82.06 points (0.1%) from 46,519.72 to 46,601.78.
What is encouraging is that the Philadelphia Semiconductor Index, which offers a glimpse into the future trend of domestic bellwether corporations Samsung Electronics and SK hynix, climbed from 6,626.4 to 6,860.2, up 23.38 points (3.5%). The MSCI Korea ETF listed in the United States also rose 0.79% over the same period.
The overall strength in U.S. stocks stems from growing expectations of interest rate cuts.
The minutes of the Federal Open Market Committee (FOMC), which offer a glimpse into the possibility of additional cuts to the U.S. benchmark rate, were released on the 8th (local time). At the FOMC meeting held on the 16th–17th of last month, most Commissioners hinted at the need for additional rate cuts this year. However, opinions diverged on whether a total of two cuts would be appropriate this year or three.
The minutes said, "Most Commissioners expected to cut rates by 0.25 percentage points at least twice by year-end," and "half of the Commissioners expected three cuts."
According to the Federal Reserve's dot plot, 10 of the 19 FOMC participants expected two more cuts by the end of the year. The increased likelihood of additional rate cuts at the FOMC meetings in Oct. and Dec. appears to be a positive signal for the domestic stock market.
Amid this sentiment, overseas investors appear to have bet on gains in the domestic market. The iShares MSCI South Korea (EWY) ETF listed on the New York Stock Exchange rose during the holiday.
EWY is an ETF that tracks the MSCI Korea 25/50 Index and is listed on the U.S. market. Because it is traded even while the domestic stock market is closed, it is regarded as an indicator that offers a glimpse into the market's direction after the closure.
The EWY ETF closed at $84.19 (about 119,549 won) on the 8th, up from $83.53 (about 118,612 won) on the 2nd. While the 0.79% gain is not very large, it is not bad considering that the Korean market was rallying to new highs right before the holiday.
However, the surging won–dollar exchange rate is a burden. During the holiday, the rate continued to rise and broke through the 1,420-won level. Generally, a rising exchange rate is seen as a headwind for the domestic stock market.
With the U.S. government halted by a shutdown, the global economic outlook is also growing more uncertain. The Bureau of Labor Statistics (BLS) of the Labor Department decided not to release the September Employment Situation report, which had been scheduled for the 3rd. If the shutdown drags on, it will be unavoidable for the September Consumer Price Index (CPI), slated for release on the 15th, to be affected as well.