[Good Morning Stock Market] US Stocks Rise on Earnings Expectations... "KOSPI Expected to Start Higher"

S&P 500 Listed Companies Q3 Net Profit Estimated to Increase by 0.4%
"Weak Dollar Index, Improved Foreign Investor Sentiment"

Image source=Reuters·Yonhap News

The domestic stock market is expected to start higher on the 17th. This is analyzed to be a continuation of the positive influence from the U.S. stock market, which closed higher due to expectations for third-quarter earnings this year.

On the 16th (local time), the Dow Jones Industrial Average closed at 33,984.54, up 314.25 points (0.93%) from the previous session. The large-cap focused S&P 500 index ended at 4,373.63, up 45.85 points (1.06%). The tech-heavy Nasdaq index closed at 13,567.98, rising 160.75 points (1.2%).

This week, major banks such as Goldman Sachs, Morgan Stanley, and Bank of America (BoA), along with regional banks, will report their earnings. Companies including Johnson & Johnson, Lockheed Martin, United Airlines, Tesla, Netflix, and American Airlines are also scheduled to announce their results. Approximately 11% of the companies listed on the S&P 500 will report third-quarter earnings this week. According to FactSet, the net profits of companies listed on the S&P 500 for the third quarter are estimated to increase by 0.4% compared to the same period last year. If this holds, it will mark the first positive growth since the third quarter of 2022.

Dovish remarks from U.S. Federal Reserve (Fed) officials were also made. Patrick Harker, President of the Federal Reserve Bank of Philadelphia, stated, "I believe we are at a point to maintain interest rates at the current level." Austan Goolsbee, President of the Federal Reserve Bank of Chicago, reaffirmed his support for keeping the benchmark interest rate unchanged, noting that "inflation is showing a downward trend."

However, concerns about volatility remain due to rising government bond yields, increasing international oil prices, persistently high inflation, and the impact of the war between Israel and Hamas. Although moves to contain the escalation have somewhat eased risk-averse sentiment, it is explained that if the war intensifies, a flight to safe-haven assets could occur at any time.

Thanks to the favorable atmosphere in the U.S. stock market, the KOSPI is expected to start higher by around 0.4 to 0.7% on the 17th. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The weakness in the dollar index is expected to positively affect foreign demand and investment sentiment domestically." He added, "However, in the short term, it is important to see whether both the KOSPI and KOSDAQ recover their 200-day moving averages." He further explained, "The gap from the 200-day moving average is currently 2.5% for the KOSPI and 2.0% for the KOSDAQ. A rebound in sectors with high investor interest and market capitalization, such as semiconductors and secondary batteries, is crucial, and ultimately, the earnings recovery of these sectors will be the key."

Han Ji-young, a researcher at Kiwoom Securities, noted, "The tone of Fed officials' remarks has softened recently, and macroeconomic environment changes have appeared since last week, such as geopolitical uncertainties and expectations of demand slowdown due to high oil prices calming the rapid rise in interest rates." She added, "Furthermore, while the KOSPI is securing downside support around 2,400 points, the dollar-denominated KOSPI is recording its lowest level since early January this year, which is also a positive factor." She concluded, "As recent stock price adjustments and won depreciation have occurred simultaneously, foreign investors are likely to find investment in won-denominated assets more attractive, so there is no need to be excessively concerned about their sell-off of Korean assets."