[Good Morning Stock Market] Weakness in US Tech Stocks... KOSPI Expected to Start Down 0.5%

Overnight, the U.S. stock market showed weakness due to earnings shocks from major tech stocks such as Tesla and Netflix, closing mixed across indices. On the 21st, the KOSPI is expected to start down around 0.5%.

On the 20th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,225.18, up 163.97 points (0.47%) from the previous session. The Standard & Poor's (S&P) 500 index closed at 4,534.87, down 30.85 points (0.68%), and the Nasdaq index closed at 14,063.31, down 294.71 points (2.05%).

As companies continued to report their Q2 earnings, Tesla and Netflix’s results fell short of expectations, shaking the overall tech sector. In particular, the Nasdaq index recorded its largest decline since March.

On the day, Tesla's stock price plunged 9.7%. The decline was further exacerbated by decreases in gross margin and operating margin, as well as CEO Elon Musk mentioning the possibility of additional price cuts and a slowdown in Q3 production. The much-anticipated specific delivery timelines for the Cybertruck and robotaxi were also not disclosed.

Netflix’s stock also fell 8.4% after reporting revenue below expectations. Other tech stocks such as Meta Platforms (-4.3%) and Amazon (-4%) also underperformed, while semiconductor-related stocks including TSMC (-5.1%), Nvidia (-3.3%), and Intel (-3.2%) closed lower.

The upcoming Federal Open Market Committee (FOMC) regular meeting next week is expected to decide the benchmark interest rate, with market expectations for a rate hike rising to 99.8%. It is anticipated that after this meeting’s final rate hike, rates will be held steady for the remainder of the year.

The KOSPI is expected to open lower due to the sharp decline in U.S. tech stocks. Seosangyoung, Head of Media Content at Mirae Asset Securities, said, "The 2% drop in the Nasdaq due to profit-taking mainly in tech stocks in the U.S. market is a burden on the Korean stock market," adding, "Especially considering the tightness in employment, the increased likelihood of a hawkish FOMC is also a concern." He continued, "The Philadelphia Semiconductor Index fell 3.62%, which could increase profit-taking desires centered on related stocks in the Korean market," and added, "Considering this, the Korean stock market is expected to start down around 0.5%, with the index direction to be determined by changes in the semiconductor sector."