On the night when the KOSPI soared 5% and put SK

On the night when the KOSPI soared 5% and put SK Hynix on a market cap of 1,000 trillion won, Iran shot a missile at the UAE.

The Dow lost 557 points. The S&P 500 fell 0.41 percent to 7,200.75, the Nasdaq Composite dropped 0.19 percent to 25,067.80 and the Dow closed 1.13 percent to 48,941.90. The trend of breaking record highs every day stopped in an instant. Nine out of 11 sectors were missing from the beauty market that continued until dawn in Korea. Energy (+0.95 percent) and technology (+0.02 percent) rose.

What was different from the previous trading day (May 1)

On Friday, May 1, the market hit a new all-time high of 7,230.12 for the S&P 500, up 0.29% and 25,114.44, for the Nasdaq, up 0.89%. Apple rose more than 3% and oil prices fell into reports of Iran's reply to the deal. The end of April was the "performance beat geopolitics" day, and the first trading day in May seemed to take over the trend.

Twenty-four hours later, the picture was turned upside down. Reports of Iran firing drones and missiles into the UAE's mainland came out, and Israel and Bahrain were placed on high alert at the same time. The threat on both sides of Hormuz was upgraded from a simple blockade to a direct attack.

Brent crude jumped 5.8%, to $114.44 a barrel. The WTI also rose above $105. Oil prices, which hit $119 on April 30 and fell to $101 on May 1, are headed upward again.

Bonds — both hawkish signals and safe-haven avoidance

The 10-year Treasury yield rose 6bp to close at 4.438%. Usually, when there is a geopolitical shock, funds are concentrated on bonds, and interest rates fall, but today it was the opposite. Interest rates rose as the surge in oil prices directly led to inflation concerns. It was a rare composition for stocks and bonds to fall at the same time.

This signal is of utmost importance. It means the market is worried about two things at the same time. One is the geopolitical shock, the other is that it will re-stimulate inflation, which will prolong the Fed's hawkish freeze. The memory of the 8-4 microwave freeze on April 29 remains intact in the bond market.

Palantir — Good performance after market close

Palantir reported first-quarter earnings after the market closed. Revenue was $1.63 billion, growing 84.7% year-over-year and exceeding the consensus by 6.1%. Adjusted EPS of $0.33 was 18.1% above the consensus. The number shows demand for AI software is coming in strongly from both the government and businesses.

However, the closing price of the regular market closed unchanged. Since the stock has already risen more than 88% until last month, good performance has not been directly linked to additional buying power. It is important how the after-hours response is reflected in the opening of Hanjang on May 6. If there is a strong rise outside the Palantir hours, it is favorable to Korean AI software stocks, and if it is weak, the IBM and Service Now pattern can be reproduced in April.

By Sector — Industrial goods and materials fell the most

The weakest sectors today were materials (-1.62%) and industrial goods (-1.02%). The trend that catapults lifted the Dow by a 10% jump on April 30 was exactly the opposite today. Industrial goods, which are highly exposed to the global economy, were directly hit by concerns that the Iranian shock would lead to a slowdown in global trade.

On the contrary, energy was the only strong rising sector. Exxon Mobil and Chevron rose more than 1%, directly benefiting from the surge in oil prices. The funds flowed out of industrial goods, materials, and finance, and the energy entered. The "expansion of market breadth," which was briefly highlighted in the last week of April, seems to have narrowed at once again.

It is comforting that the technology sector has remained flat. The insensitivity of buying centered on AI semiconductors to geopolitical shock is not a negative sign for Korean semiconductor stocks. However, it is more of a wait-and-see approach than additional buying power until AMD announces its earnings on Tuesday night (early Wednesday morning in Korean time).

Money Flows — VIX Rising and No Safe Assets

The CBOE Volatility Index (VIX) rose sharply. It is a sign that the market has become sensitive to short-term volatility again. Gold usually rises at this time, but gold fell 1.40% today. Silver also fell 2.68%. Stocks are falling out, but safe assets are also falling out.

The reason is the Fed's hawkish signal. Higher interest rates increase the opportunity cost of gold. The shadow of the 8-4 microwave freeze on April 29 hangs heavily across the asset market in the first week of May. As a result, some of the funds that fall out of the market have gone to energy, but the rest seems to have gone to cash.

What to see on the next trading day

It is closed for Children's Day in Korea on Tuesday (May 5), but the U.S. is open normally. That night, ISM service industry PMI and JOLTS job openings will be announced in the U.S., and AMD and ARM Holdings will perform after the market closes.

AMD is crucial. Whether AMD takes over the narrative that Intel's "AI inference demand saves CPU," which soared 23% last week, will determine the flow of Han Kook-dong's semiconductor on May 6 (Wednesday). The consensus is EPS of $1.29 (+34.4% year-on-year) and sales of $98.9 billion (+33%). If AMD wins the consensus by a large margin and raises its guidance, another positive development will be built in the U.S. during Korea's two-day break. On the contrary, when IBM and ServiceNow patterns come out, the KOSPI starts with a gap-down on May 6.

Subsequent development of the Iran-UAE conflict is also key. If the missile strike ends in a single shot, the market is likely to absorb the geopolitical shock once again. However, if Israel retaliates or the conflict extends beyond Hormuz, the $120 oil price range will be the new baseline.

Today, SK Hynix's market cap hit W1,000 trillion in Korea, and on the same day, Iran shot a missile at the UAE in the U.S. The narrative of "performance beats geopolitics" shown by the last week of April was put to the test on its first business day in May. AMD's answer Tuesday night was the first result of the test. While Korea is off for Children's Day, the answer comes from the U.S.

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