[Good Morning Stock Market] US Stocks Narrow Losses Despite Earnings Concerns... "KOSPI Starts Higher"

Mixed Trends Amid Corporate Earnings Concerns
Positive Narrowing of Declines... KOSPI Expected to Start Up 0.3%

[Asia Economy Reporter Lee Jung-yoon] As concerns about corporate earnings emerged, the U.S. stock market showed mixed results. This contrasted with the earlier upward trend driven by expectations of a slowdown in the Federal Reserve's (Fed) interest rate hikes, and profit-taking selling appeared in technology stocks that had risen relatively sharply since the beginning of the year following earnings announcements.

[Image source=AP·Yonhap News]

On the 25th (local time), the Dow Jones Industrial Average closed at 33,743.84, up 9.88 points (0.03%) from the previous session. The S&P 500, focused on large-cap stocks, ended the day down 0.73 points (0.02%) at 4,016.22. The tech-heavy Nasdaq closed at 11,313.36, down 20.91 points (0.18%). The Dow, which had fallen as much as 460 points early in the session, turned positive just before the close, while the S&P 500 and Nasdaq narrowed their losses in late-session buying but ultimately finished lower.

By sector, utilities, technology, communication, industrials, and energy stocks within the S&P 500 declined. Microsoft (MS) fell 0.59% due to a weak quarterly guidance. MS's quarterly revenue guidance of $50.5 billion to $51.5 billion fell short of Wall Street's consensus estimate of $52.43 billion compiled by Refinitiv. Boeing's quarterly loss narrowed compared to the same period last year but was larger than market expectations. Its revenue also missed estimates, causing the stock to fall more than 1% before closing up 0.33%.

Telecommunications company AT&T rose 6.58% on increased new subscriber additions. Capital One Financial surged nearly 9% despite weak earnings. Media company News Corp rose 5.68% after media mogul Rupert Murdoch withdrew plans to merge with Fox.

According to FactSet, more than 90 companies (19%) listed on the S&P 500 have reported their fourth-quarter earnings, with 68% beating expectations. This is below the four-quarter average of 76%.

Investors are closely watching mixed corporate earnings ahead of this week's major economic data releases and next week's Federal Open Market Committee (FOMC) meeting. Key U.S. economic data, including GDP and Personal Consumption Expenditures (PCE), will be released this week.

Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, expects the U.S. stock market's sharp decline in large tech stocks after MS's earnings announcement to have a positive impact on the domestic market on the 26th, as expectations for second-half earnings entered during the session helped reduce losses. He predicted the domestic market would start with a rise of around 0.3% and then fluctuate depending on foreign investors' supply and demand.

Seo explained, "Although some companies that reported weak earnings showed weakness, the lack of broad sector-wide declines and psychological stability, along with positive developments such as optimism flowing mainly from institutional investors, especially those in Asia, are favorable." He also pointed out that Tesla's steady earnings and margin announcement after market close, along with its sideways movement in after-hours trading, contributed to the absorption of selling pressure in the domestic market.

Han Ji-young, a researcher at Kiwoom Securities, analyzed that the improved risk appetite, as evidenced by the U.S. market narrowing losses during the session, was due to the earnings season progressing better than feared amid FOMC caution. However, Han noted, "It is somewhat burdensome to make preemptive bets on whether Fed Chair Jerome Powell will conform to or temper market expectations at the February FOMC, so from now on, it is necessary to consider volatility bets rather than index directionality."

She added, "The domestic market's index ceiling will face resistance due to profit-taking, but a stock-specific market is expected to continue influenced by individual earnings results of major companies such as Hyundai Motor and EcoPro BM. Also, since Tesla's conference call results could affect the investment sentiment of domestic secondary battery stocks awaiting earnings announcements, attention to related events is necessary."