[Good Morning Market] US Stock Market Decline Impact 'Weak Outlook', Focus on Samsung and LG Earnings

Domestic Stock Market Expected to Start Lower
Samsung Electronics Q4 Operating Profit Down 69% YoY
LG Electronics Also Expected to Struggle with 53% Decline

[Asia Economy Reporter Kwangho Lee] The U.S. stock market fell more than 1% due to increased concerns over tightening following strong private employment data. As a result, the domestic stock market is expected to start slightly lower.

The domestic stock market is expected to be influenced by concerns over additional tightening by the U.S. Federal Reserve (Fed) and expanding economic uncertainties, along with Samsung Electronics' preliminary Q4 earnings announcement. Although it closed higher for two consecutive days recently, it is unlikely to avoid the impact of the U.S. stock market decline.

On the 5th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,930.08, down 339.69 points (1.02%) from the previous session. The Standard & Poor's (S&P) 500 index fell 44.87 points (1.16%) to 3,808.10, and the Nasdaq index dropped 153.52 points (1.47%) to 13,305.24.

Sangyoung Seo, a researcher at Mirae Asset Securities, analyzed, "Weekly jobless claims and December ADP private employment exceeded market expectations. The tight labor market situation raised concerns that wage and price pressures would worsen, leading to worries about the Fed's 'additional' tightening measures to curb this. This manifested as a stronger dollar and rising U.S. Treasury yields, increasing downward pressure on the stock market."

[Image source=Yonhap News]

Investors focused on U.S. private employment data and remarks from Fed officials. The private employment figures released that day significantly exceeded market expectations, intensifying concerns about Fed tightening. The Fed expects the labor market to gradually slow down due to interest rate hikes. However, the labor market still showed strength.

According to the ADP National Employment Report, private sector employment in December increased by 235,000 compared to the previous month. This greatly exceeded the expert forecast of 153,000 compiled by The Wall Street Journal (WSJ). ADP employment data serves as an indicator of the U.S. labor market conditions in December ahead of the Labor Department's employment report released later this week.

The domestic stock market is expected to focus on Samsung Electronics' preliminary Q4 earnings announcement amid concerns over additional Fed tightening and expanding economic uncertainties. As confirmed by the U.S. November trade data, the decline in U.S. consumer spending capacity has led to a significant drop in imports, which is unwelcome news for domestic IT and home appliance companies.

A key issue during the trading session is expected to be the preliminary earnings of Samsung Electronics and LG Electronics, which have recently shown signs of bottoming out in their stock prices. Samsung Electronics recorded an operating profit of 4.3 trillion won in Q4, a 69% decrease compared to the same period last year. LG Electronics' operating profit consensus is expected to be 320 billion won (-53%). However, since expectations for these earnings have already been lowered, even results meeting consensus are likely to result in a neutral or better stock price trend.

Jiyoung Han, a researcher at Kiwoom Securities, emphasized, "Since the domestic stock market is showing no clear direction, there have been frequent sharp fluctuations in theme stocks related to news such as Dubai's 10-year 100 trillion won investment execution and China's reopening, as well as in small and mid-cap stocks. Rather than aggressively joining the rise of theme stocks, it is advisable to invest conservatively by verifying facts and earnings."