[Good Morning Stock Market] Clear Stock Price Differentiation Based on Individual Companies' Earnings

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 26th, a differentiated market is expected to unfold following the earnings announcements of individual companies. However, given the ongoing economic slowdown, the upward trend is expected to be limited.

The New York stock market rose as Tesla's market capitalization surpassed $1 trillion ahead of the earnings announcements of major tech companies. The Dow Jones Industrial Average and the Standard & Poor's (S&P) 500 closed at record highs. On the 25th (local time), the Dow Jones rose 64.13 points (0.18%) from the previous session to close at 35,741.15. The S&P 500 increased by 21.58 points (0.47%) to finish at 4,566.48. The Nasdaq rose 136.51 points (0.90%) to close at 15,226.71. While investors were closely watching the earnings reports of major IT companies, Tesla's stock price surged more than 10%, leading the market sentiment.

◆ Seo Sang-young, Researcher at Mirae Asset Securities = The KOSPI is expected to start slightly higher today. The Korean stock market showed a decline during the day due to the remarks of Federal Reserve (Fed) Chairman Jerome Powell, but it successfully turned upward after SK Hynix surged more than 3% intraday, supported by foreign and institutional buying following news that Micron's DRAM production plant was shut down due to the Taiwan earthquake. Additionally, some energy sectors, travel, aviation, and financial sectors showed strength on expectations of a "with-corona" recovery, which also contributed to the rise.

Meanwhile, although the economic slowdown continued to be a concern in the U.S. stock market, the market rose in response to positive news from individual companies, which is a positive factor for the Korean stock market. However, considering that these are individual factors, the extent of the rise is expected to be limited. The Philadelphia Semiconductor Index rose 0.66%, but this was seen as a pre-reflection of the Taiwan earthquake impact from the previous day and results from positive news from some companies, so the influence is expected to be limited.

It is particularly noteworthy that the global stock market is reacting sensitively to changes in individual companies, with fluctuations occurring mainly in related stocks. Market changes are expected depending on the earnings announcements of companies such as SK Hynix and Hyundai Motor. Considering this, the Korean stock market is expected to start slightly higher and then fluctuate based on individual companies' earnings results. However, concerns about the economic slowdown persist, so the rise is expected to be limited.

◆ Han Ji-young, Researcher at Kiwoom Securities = The September Chicago Fed National Activity Index (-0.13, expected +0.35) was weak, but the October Dallas Fed Manufacturing Index (14.6, expected 6.5) improved, showing that the impact of supply shortages varies across major U.S. regions. Following Fed Chairman Powell, Treasury Secretary Yellen recently also projected that the high inflation caused by bottlenecks will continue into the first half of next year, indicating that key policymakers acknowledge the prolonged supply shortages. Since upward pressure on major commodity prices such as international oil and natural gas remains, the likelihood of inflation figures falling rapidly is slim.

In this context of prolonged inflation issues, unlike early to mid-October, a positive aspect is that earnings momentum is offsetting the inflation shock as a negative factor. Among about 110 companies in the S&P 500 that have reported earnings so far, approximately 84% showed better-than-expected performance, and although not as many as in the U.S., domestic companies are also experiencing a favorable earnings season. This suggests that companies are absorbing supply chain cost burdens without major shocks and that concerns about demand slowdown, which some feared, are exaggerated. Considering these factors, the KOSPI, which has been holding steady around the 3,000 level based on recent closing prices, is expected to continue its upward trend today, supported by positive momentum from the U.S. However, since the earnings season is at the center of the market, the market is expected to show a differentiated trend where stock prices fluctuate according to individual companies' earnings rather than a broad market rally. The fact that Tesla surged over 12% the previous trading day on news of a 100,000 Model 3 order from rental car company Hertz is expected to contribute to the recovery of investor sentiment in domestic electric vehicle and secondary battery-related stocks, which have struggled to break out of the recent correction phase.