The U.S. stock market fell across the board due to rising U.S. Treasury yields, a surge in international oil prices, and concerns over consumer slowdown following disappointing earnings from Walmart. However, semiconductor stocks showed strength following Micron's announcement of a significant investment in artificial intelligence (AI). As the domestic market has seen a recent drop, attention on August 21 will be on foreign investment and sector-specific trends.
On August 20, the Dow Jones Industrial Average closed down 703.84 points (1.32%) at 52,759.21. The S&P 500 fell 66.82 points (0.87%) to finish at 4,641.16, while the tech-heavy Nasdaq dropped 263.93 points (1.00%) to close at 26,067.17.
The primary factor weighing on the U.S. market was the renewed rise in long-term Treasury yields. After a brief stabilization following the U.S. Treasury's announcement to expand its buyback program, yields turned upward again. The yield on the 30-year Treasury bond rose to 5.24%, an increase of about 4 basis points, while the 10-year yield climbed to 4.70%.
Although the Treasury hinted at the possibility of further buyback expansions, the ongoing rise in long-term rates has heightened concerns about structural supply pressures due to budget deficits, increased Treasury supply, and rising corporate bond issuance linked to big tech's AI investments.
International oil prices also increased, with Brent crude for October delivery and West Texas Intermediate (WTI) for September rising by 2.36% and 2.33%, respectively, to $93.78 and $87.83 per barrel. Prolonged oil price increases could reignite inflationary pressures, complicating the Federal Reserve's monetary policy.
Concerns over a slowdown in U.S. consumer spending further dampened investor sentiment. Walmart reported its lowest same-store sales growth in six years for the second quarter, leading to a 9.15% drop in its stock price. Rising oil prices are signaling constraints on consumer spending, raising fears of an economic slowdown.
In contrast, semiconductor stocks performed relatively well. Micron announced a large-scale AI investment plan, resulting in a 4.0% increase in its stock, which supported overall investor sentiment in the semiconductor sector. Nvidia's stock only dipped by 0.3%.
The domestic market is expected to open lower, influenced by rising U.S. long-term rates and weakness in the New York market.
As of 8:38 a.m. on August 21, shares of Samsung Electronics were down 0.7%, and SK Hynix fell 0.1%. Other major semiconductor and tech stocks, including SK Square (-2.2%) and Samsung Electro-Mechanics (-3.0%), also showed weakness.
However, the domestic market's earnings momentum and low valuations are seen as factors supporting a floor. As of August 20, the consensus for KOSPI's operating profit for 2026 and 2027 was estimated at 986 trillion won and 1,311 trillion won, respectively. Analysts noted that despite rising interest rates, energy costs, and currency pressures in August, profit forecasts have not been significantly damaged.
Additionally, the KOSPI's forward price-to-earnings ratio (PER) is only around 5.5 times, indicating that the valuation burden from rising rates is relatively manageable. Expectations for increased shareholder returns from large-cap stocks, including Samsung Electronics and SK Hynix, are also expected to act as a buffer for the domestic market.
Market analysts suggest that while the upward trend in long-term rates may continue, it is essential to prepare for increased volatility. However, they believe that unless there is a sharp rise in rates, the likelihood of a repeat of the market instability seen in July is low. They are also watching for a rotation into sectors that have underperformed amid ongoing foreign investment.
Han Ji-young, a researcher at Kiwoom Securities, stated, "Concerns over consumer slowdown due to Walmart's poor earnings, rising international oil prices, and renewed interest rates have put pressure on the U.S. market. The domestic market is expected to open lower, influenced by rising U.S. market rates and Nasdaq weakness, but sector differentiation will unfold based on foreign investment."
She added, "While the 10-year and 30-year Treasury yields remain high, market participants have been adapting to the high-rate environment throughout the year. The key factor is the speed of rate increases rather than the absolute level. Given the KOSPI's solid earnings momentum and a forward PER of only 5.5 times, a split-buy strategy focusing on large-cap stocks, including semiconductors, remains valid even if further adjustments occur."
* This article has been translated by AI.
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