[MarketING] Stock Market Enters Pause as Earnings Are Monitored

KOSPI Falls for 3rd Day... Drops Below 2540
KOSDAQ Drops Over 1%, Also Falls Below 860

The KOSPI and KOSDAQ have continued their decline for the third consecutive day. This week, earnings reports from major U.S. and domestic companies are scheduled one after another, and next week the U.S. Federal Open Market Committee (FOMC) meeting for May is set to take place, leading the market to likely adopt a cautious stance. As a result, the stock market has generally entered a lull, with individual stock movements expected to be driven by corporate earnings announcements.

KOSPI Falls for Third Day... Drops Below 2540 Level

As of 10:20 a.m. on the 24th, the KOSPI stood at 2,533.08, down 11.32 points (0.44%) from the previous day. The KOSDAQ fell 10.31 points (1.19%) to 858.51. Both KOSPI and KOSDAQ have been declining for three consecutive days. The KOSDAQ’s losses have been widening, falling below the 860 mark.

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With the recent market entering a consolidation phase, it is expected that the cautious sentiment will deepen ahead of major corporate earnings announcements and the FOMC meeting. Joon-ki Cho, a researcher at SK Securities, said, "The market as a whole is entering a lull as investors show high sensitivity to companies’ first-quarter earnings announcements. Since there are no major macroeconomic events scheduled before the FOMC on May 2-3, market participants are likely to adopt a wait-and-see and cautious attitude until the FOMC results are confirmed. Individual stock movements may develop depending on corporate earnings reports."

Attention is expected to focus on individual corporate earnings and issues, leading to a stock market driven by specific stocks. Last week, the U.S. stock market showed a similar pattern, closing slightly higher. On the 21st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 0.07%, the S&P 500 increased 0.09%, and the Nasdaq Composite gained 0.11%. Sang-young Seo, a researcher at Mirae Asset Securities, analyzed, "The U.S. stock market is showing a stock-specific market with increased volatility depending on individual sectors and stock issues without a clear direction. The Korean stock market is expected to show a similar trend. Ahead of the earnings announcements of major U.S. tech companies and key economic indicators, rather than showing active changes, the market will likely focus on foreign investor flows and maintain a sideways stock-specific market."

This week, the first-quarter earnings of major U.S. big tech companies will be released, starting with Alphabet, Google's parent company, and Microsoft (MS). Both Alphabet and MS will announce earnings on the 25th. On the 26th, Meta, Facebook’s parent company, will release its first-quarter results. Since sales have declined for three consecutive quarters from Q2 to Q4 last year, attention is focused on whether the sales decline continued in Q1 this year. Amazon and Intel will announce their earnings on the 27th.

Ji-young Han, a researcher at Kiwoom Securities, explained, "The fact that earnings from U.S. big tech companies such as Amazon and MS are pending is a factor influencing the market direction during the week. Although the first-quarter earnings season has been progressing well recently, centered on U.S. financial stocks, the reason the market’s upside has been limited is due to caution surrounding changes in earnings and guidance from big tech companies reflecting restructuring and production disruptions."

Short-Term Adjustment Inevitable Due to Gap Between Expectations and Reality

Domestic major companies will also continue to announce earnings. Hyundai Motor will report on the 25th, SK Hynix, LG Display, and Samsung C&T on the 26th, and Samsung Electronics, Samsung SDI, LG Chem, LG Electronics, POSCO Holdings, and POSCO Future M on the 27th.

Han said, "The earnings announcements of leading companies in key domestic industries such as Samsung Electronics, SK Hynix, Hyundai Motor, and Samsung SDI are also key points to watch during the week. Among them, Samsung Electronics’ conference call, which officially confirmed artificial production cuts through preliminary results in early April, will be a factor determining the direction of semiconductor stocks, which have been stagnant since mid-April."

Amid earnings anticipation, caution regarding the upcoming FOMC meeting next week is also expected to increase. Ahead of the FOMC, members of the U.S. Federal Reserve have entered a blackout period this week (a period during which Fed officials are prohibited from speaking to prevent market confusion before the FOMC). Jaeseon Lee, a researcher at Hyundai Motor Securities, said, "The unexpectedly strong earnings of major U.S. companies are expected to support the market’s downside, but cautious sentiment will remain strong this week, limiting significant gains. It is likely that the market will move within a narrow range until the May FOMC."

Since stock prices have already anticipated earnings, a short-term correction is inevitable as the market confirms the gap between reality and expectations through earnings announcements. Kyung-min Lee, a researcher at Daishin Securities, said, "From the last week of April, when the full earnings season begins, through early May, it is highly likely that a phase of adjusting the gap between expectations and reality by sector and stock will continue. A short-term correction due to the gap between advanced expectations and reality is inevitable." He added, "The second quarter is expected to be a turning point for fundamentals (economy, exports, earnings), and considering the fundamental directional change, it will be an opportunity to increase weightings."

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