[Good Morning Stock Market] US Stock Market January Effect Benefit Expected vs FOMC Caution Sentiment

[Asia Economy Reporter Kwon Jae-hee] The three major New York stock markets closed higher ahead of the Federal Reserve's Federal Open Market Committee (FOMC) regular meeting results to be announced the next day, buoyed by strong earnings reports from ExxonMobil and GM.

On the 31st (local time), the Dow Jones Industrial Average rose 1.09% (368.95 points) to close at 34,086.04, the Standard & Poor's (S&P) 500 index increased 1.46% (58.83 points) to 4,076.60, and the Nasdaq index jumped 1.67% (190.74 points) to finish at 11,584.55.

The International Monetary Fund (IMF) assessed that the global economy showed remarkable resilience, supported by a strong labor market, steady household consumption and corporate investment, and better-than-expected adaptability to Europe's energy crisis.

The Eurozone's economic growth rate for the fourth quarter rose by 0.1%, surpassing market expectations which had forecast a 0.1% contraction. The Conference Board's January U.S. Consumer Confidence Index fell below both the previous month's 108.3 and the expected 109.0, reflecting growing consumer concerns about a recession.

Despite heightened caution ahead of the FOMC, the U.S. stock market saw notable strong performances from GM (8.4%) and ExxonMobil (2.2%). GM surged after reporting a fourth-quarter earnings surprise and providing a smaller-than-expected downward revision to its annual guidance. ExxonMobil showed strength despite weak sales, as its net profit exceeded market expectations.

[Image source=Reuters Yonhap News]

Seokhwan Kim, Researcher at Mirae Asset Securities: "Index Market Expected to Rise Around 0.2% with Halo Effect"

The KOSPI index is expected to start with a rise of around 0.2%.

Although the domestic market widened its correction range due to Samsung Electronics' earnings conference call the previous day, the optimistic expectations for global economic growth and the rapid recovery of the Chinese economy are expected to sustain foreign investors' preference for risk assets. Therefore, today's inflow of foreign demand and the stabilizing effect of the won-dollar exchange rate are expected to support the stock market's rise. In particular, considering that the U.S. stock market showed its best monthly performance since 2019 in January, a halo effect can be anticipated.

Attention should also be paid to the January export-import trends scheduled to be announced before the market opens today. Despite uncertain external conditions, South Korea's exports in 2022 increased for the second consecutive year, recording the highest-ever export performance and trade volume. However, as the global economic slowdown accelerated due to inflation and interest rate hikes by major countries, export growth slowed from mid-last year. Nevertheless, South Korea rose one rank to 6th place in the global export rankings. This was due to steady increases in exports of key products such as automobiles, petroleum products, secondary batteries, and new industry items among the 15 major categories.

However, semiconductors, which recorded $10 billion in exports for 17 consecutive months from May 2021 to September 2022, saw a sharp decline in exports for two consecutive months in November (-29.9%) and December (-29.1%) last year due to decreased capital investment and oversupply amid the global economic slowdown, leading to continued price declines. It will be important to observe whether the slowdown in semiconductor exports, a core item driving South Korea's exports, begins to ease.

[Image source=Reuters Yonhap News]

Jiyoung Han, Researcher at Kiwoom Securities: "Sectoral Differentiation Expected Amid FOMC Caution"

The domestic market closed mixed yesterday as Samsung Electronics, amid FOMC caution, stated there would be no artificial cuts despite the semiconductor downturn, triggering foreign selling mainly in semiconductors and large-cap stocks. The KOSPI fell 1%, while the KOSDAQ rose 0.3%.

Today, a technical price rebound is expected following the sharp declines after this week, but amid FOMC caution, sectoral differentiation is likely to unfold as individual earnings issues from SK Hynix, Amorepacific, Samsung C&T, and others are absorbed.

The January export results, scheduled to be announced before the market opens, are also expected to impact individual sector stock prices. The consensus for January exports forecasts an 11.3% decline year-on-year, worse than the previous month's (-9.6%). However, similar to last month's export results announcement, although overall exports may be sluggish, the export performance of key sectors such as semiconductors, secondary batteries, automobiles, and chemicals will likely cause varying stock price momentum among related groups.