[Good Morning Stock Market] US Stocks Boosted by Apple and Tesla... Korean Market Expected to Enter Earnings Season

Apple Hits Historic Intraday Market Cap of $3 Trillion
IT and Travel Sectors Rise on Strong Earnings Expectations
Impact on Domestic Market... Optimism for Auto and Semiconductor
"Will React Sensitively to Earnings-Related News"

On the 28th of last month (local time), traders were conducting their business on the floor of the New York Stock Exchange (NYSE) in the United States. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The U.S. stock market closed higher, buoyed by gains in Apple and Tesla. Amid a rebound buying wave following the year-end decline, attention focused on the earnings of individual companies. The domestic stock market is also expected to gradually show sensitive reactions to earnings-related news.

On the 3rd (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed at 36,585.06, up 0.68% from the previous trading day. The S&P 500 index rose 0.64% to 4,796.56, and the tech-heavy Nasdaq index closed up 1.20% at 15,832.80.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = The U.S. stock market showed differentiation by company and industry ahead of the earnings season. Tesla’s Q4 deliveries reached 308,600 units, significantly surpassing both Q3’s 241,300 units and the market expectation of 270,000 units. Despite supply chain uncertainties, the sharp increase in deliveries is interpreted as spreading optimism about earnings.

Apple also showed a clear upward trend. The sale of 27 million AirPods at year-end highlighted the expected strong growth in the wearable segment this year. Expectations for the imminent launch of virtual reality (VR) devices also contributed, pushing its market capitalization above $3 trillion intraday for the first time.

Although new COVID-19 cases in the U.S. exceeded 500,000, the market focused on the fact that severe cases and deaths are not increasing. Despite the cancellation of about 15,000 flights since the 24th of last month, airline, travel, and resort sectors showed strength. The energy sector, including ExxonMobil, also rose, supported by remarks from the next OPEC chairman that oil demand is expected to recover to pre-pandemic levels by year-end.

The U.S. stock market was characterized by sensitive reactions to changes centered on individual companies and sectors rather than new news. Especially ahead of earnings announcements, the market showed heightened sensitivity to related news. It is expected that global stock markets, including the U.S., will focus on earnings.

The domestic stock market is no different. The 12-month forward earnings per share (EPS) for Korea was revised upward by 0.9% compared to last week, which is positive. Particularly, operating profits for semiconductors, displays, and IT hardware have been revised upward, suggesting that related stocks will show a solid trend. However, the strong dollar and the sharp rise in U.S. Treasury yields, along with the continued hawkish monetary policy stance of the Federal Reserve, remain burdens. Considering this, the domestic stock market is expected to start with a slight rise and maintain strength centered on stocks with upwardly revised earnings forecasts, while paying attention to economic indicators such as China’s Caixin Manufacturing Purchasing Managers’ Index (PMI).

◆ Jiyoung Han, Researcher at Kiwoom Securities = Despite the spread of the COVID-19 Omicron variant, the outlook for economic normalization and other positive factors support expectations for a new year rally in the U.S. stock market. As confirmed by the Markit Manufacturing PMI for the U.S. and Eurozone, there are signs that supply shortages have eased since last month, which will be a factor improving the environment surrounding major stock markets. Although uncertainties related to the Russia-Ukraine war will continue this month, they are expected to affect volatility rather than market direction.

The domestic stock market is expected to be led by sectors with individual positive factors such as automobiles and IT, despite the short-term burden of the won-dollar exchange rate rising back to the 1,190 won level. Besides Tesla, which recorded a 'surprise' in Q4 vehicle deliveries, Hyundai Motor and Kia’s strong overseas sales last month are expected to act as a tailwind for automobile-related stocks, including electric vehicles.

The strength of semiconductor stocks such as Micron Technology and AMD in the U.S. market is also positive news. This encourages expectations for net foreign buying centered on domestic semiconductors. However, considering that the exchange rate, closely linked to foreign demand and supply, remains a short-term burden, the upper limit of their stock prices is likely to be constrained by supply and demand factors.

This content was produced with the assistance of AI translation services.