[Good Morning Stock Market] 'Upside' Blocked, 'Rise' Stalled... Netflix Plunge Triggers 'Media Stock Volatility'

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[Asia Economy Reporter Lee Seon-ae] On the 20th, the domestic stock market is expected to start higher. However, the upside remains capped due to factors such as trade slowdown, high inflation impact, and prolonged Ukraine crisis. A stock-specific market is likely to unfold as expectations for the earnings season clash. In particular, Netflix's sharp decline in the U.S. stock market is expected to cause volatility in media-related stocks or growth stocks in the domestic market on this day.

On the 19th (local time), the U.S. stock market opened mixed near the flat line after the International Monetary Fund (IMF) lowered its global growth forecast by 0.8 percentage points to 3.6%. Especially, the 10-year U.S. Treasury yield reached 2.93%, causing the tech-heavy Nasdaq to fall. However, with the U.S. federal court lifting the mask mandate on public transportation, reopening-related stocks surged, and tech stocks expected to show improved earnings in the full-fledged earnings season strengthened, pushing the Nasdaq up more than 2%. Subsequently, amid a stock-specific market, the Dow Jones Industrial Average closed at 34,911.20, up 1.45% from the previous trading day. The large-cap-focused Standard & Poor's (S&P) 500 index rose 1.61% to 4,462.21. The tech-heavy Nasdaq index ended the session at 13,619.66, up 2.15%. Additionally, the small- and mid-cap-focused Russell 2000 index jumped 2.00%.

◆ Seo Sang-young, Researcher at Mirae Asset Securities = The Korean stock market led gains as semiconductor stocks showed strength amid expectations of improved business conditions in the U.S. market the previous day. In particular, foreign investors' net buying inflows after 10 trading days had a positive impact on supply and demand. Furthermore, ahead of the earnings season, buying interest focused on large-cap stocks, which can be seen as driving the index higher.

Meanwhile, the rise in the U.S. stock market despite global growth slowdown and a sharp rise in bond yields is positive for the Korean stock market. Especially, the tendency of market participants to focus on earnings during the earnings season despite various negative factors suggests a shift toward a stock-specific market. Additionally, one of the reasons for the U.S. market's rise was the surge in reopening-related stocks due to the mask mandate being nullified, which could further stimulate the effect of lifting social distancing in Korea, leading to a solid performance centered on related stock groups. However, the IMF's downward revision of global economic growth following the World Bank poses a burden on the Korean stock market. Along with this, trade slowdown, high inflation impact, and the prolonged Ukraine crisis, as well as the need to reassess their economic impact, still limit the upside.

Considering this, the Korean stock market is expected to start slightly higher, then experience a stock-specific market as concerns over global economic slowdown and the rising won-dollar exchange rate clash with expectations for the earnings season. In particular, although IBM, which reported earnings after the U.S. market close, posted solid results and rose, Netflix's plunge of more than 24% due to a decline in subscribers and revenue slowdown caused by a decrease in Russian subscribers could also weigh on the market, suggesting that the process of absorbing such selling pressure will continue.

◆ Han Ji-young, Researcher at Kiwoom Securities = As pointed out as the background for the IMF's downward revision of growth forecasts, the Ukraine crisis, inflation, and the Federal Reserve's (Fed) tightening have been confirmed as factors slowing global economic growth momentum. The slowdown in growth is inevitable due to the base effect from the high growth in 2021, and the key issue now is whether the global economy will form a downward path toward a soft landing, hard landing, or recession.

There are opinions concerned about recession whether caused by the Fed's tightening or the Ukraine crisis. However, such concerns appear to be digested through price adjustments in the stock market. Also, although the Fed advocates aggressive rate hikes and the 10-year yield is approaching the 3% level, it is important to remember that the Fed is focusing on minimizing the economic and stock market shocks it may cause. Considering the tight labor market conditions in major countries including the U.S. and reopening demand, the possibility of a sharp global economic cooling is judged to be low.

Today, the domestic stock market is expected to show a favorable price trend as it absorbs concerns about global economic growth slowdown and rising interest rates, influenced by the sharp rise in the U.S. stock market centered on the Nasdaq. However, Netflix, which reported earnings after market close, recorded a shock of net subscriber outflow (-200,000, expected +2.5 to 2.7 million) for the first time in about 11 years, causing its after-hours stock price to plunge more than 20%. This is expected to increase price volatility in domestic media-related stocks or overall growth stocks. On the other hand, as confirmed by the simultaneous strength in U.S. travel, airline, and cruise sectors, the earnings expectations for reopening stocks remain valid, so the domestic market is expected to develop a differentiated market depending on earnings issues.

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