[Good Morning Stock Market] "Waiting Trend to Deepen Ahead of FOMC Minutes Release"

US Stock Market Rises on Strong Retail Earnings Performance

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Minji Lee] The U.S. stock market showed an upward trend influenced by strong earnings from retail companies. The Dow Jones Industrial Average rose 0.71%, and the S&P 500 index also increased by 0.19%. Today, the KOSPI is expected to see cautious trading ahead of the release of the FOMC (Federal Open Market Committee) minutes and the July retail sales index.

Seokhwan Kim, Researcher at Mirae Asset Securities: “Cautious sentiment will increase ahead of the FOMC minutes release.”

In the U.S. stock market, the consumer goods sector showed strength. Strong earnings from Walmart (5%) and Home Depot (4%) drove gains in related industries. As the Q2 earnings season nears its end, retailers reporting results exceeding expectations provided relief to investors.

The domestic stock market is expected to see increased cautious sentiment ahead of key events such as the FOMC minutes and U.S. July retail sales. Since the market showed upward movement centered on large-cap companies with downward rigidity, a similar trend is expected today.

With the completion of the domestic companies’ semi-annual earnings announcements as of yesterday, Samsung Electronics revealed that its global smartphone market share in the first half of this year rose to 22.6%, up 2.5 percentage points compared to the same period last year. The DRAM semiconductor market share increased by 0.6 percentage points to 43.5% during the same period. The TV segment’s market share declined by 1.1 percentage points to 31.6%, affected by geopolitical risks and expanded supply chain uncertainties.

The Inflation Reduction Act, actively promoted by the U.S. Democratic Party and the Biden administration, was officially enacted with President Biden’s signature. The bill includes energy and climate provisions worth approximately $374 billion. Due to expectations surrounding the bill, there is a possibility of profit-taking in electric vehicle and renewable energy sectors that had risen earlier today.

Sanghyun Park, Researcher at Hi Investment & Securities: “U.S. economic weakness may not lead to a severe recession.”

Looking at the Q2 GDP growth rates of major global countries, the U.S., China, and Germany showed sluggish growth. The weakness of the G3 economies, which account for about 46% of the world GDP, inevitably impacts the global economy negatively. The issue is that the G3 economies carry different risks related to cycles and economic conditions. This implies that a strong global economic rebound is unlikely.

The U.S. economy continues to face recession debates, and August economic indicators sent signals that the economic trend could deteriorate rapidly. The sharp declines in the August New York Empire State Manufacturing Index and the National Association of Home Builders (NAHB) Housing Market Index have amplified concerns about the economic cycle. If this sharp decline trend continues, the U.S. may enter a recession phase faster than expected; however, if it is a temporary phenomenon, it can be interpreted as a transient relief from the shock of interest rate hikes.

However, recession risks could instead trigger a change in the Federal Reserve’s rate hike stance. Falling oil prices and other factors may ease inflationary pressures and lead to a rebound in consumer sentiment, strengthening the downward rigidity of the U.S. economy. Therefore, excessive concerns about some sharp declines in economic indicators should be approached with caution.

Kyoungsoo Lee, Researcher at Hana Securities: “Q3 earnings outlook is not favorable.”

As the Q2 earnings season concludes, operating profit reached 53.3 trillion KRW, 3% higher than market expectations. Top surprise stocks included DL, Hanwha Life, KEPCO Engineering & Construction, EcoPro, SK Networks, BGF, GS, POSCO Chemical, Hanwha Solutions, and Hotel Shilla. Among large-cap stocks, Hyundai Motor grew 30% above market expectations, while Hanwha Solutions (72%), SK Innovation (41%), and EcoPro BM (51%) also posted surprises.

The Q2 earnings surprise rate is expected to influence market expectations for Q3 or next year, but current domestic Q3 earnings estimates have been slightly downgraded. As economic factors become more important than inflation, stock-specific responses are necessary.