Last week, cybersecurity stocks suffered a broad sell-off after Fujitsu's earnings report showed lower profit, while chemical stocks were heavily bought as strong-performing value stocks, and issues including Harima Chemicals Group, which rose 31.7%, surged. With the US midterm elections ahead this week, market sentiment could change dramatically.
Last week, IT company Fujitsu plunged after announcing an earnings report showing lower profit, and machinery and systems stocks on the “work-performing side” of AI-related businesses fell broadly. Meanwhile, resource sectors such as shipping and mining remained relatively firm on the benefit of higher crude oil prices, and major shipping company Nippon Yusen was seen rising alongside an upward revision to its full-year forecast.
In the US market, deterioration in Intel's earnings outlook and weaker momentum from AI investment ultimately triggered a sharp fall in AI stocks. Although signs of a WH rally were emerging, rotation between sectors progressed. Funds flowed into undervalued chemical stocks with strong earnings, with Harima Chemicals Group rising 31.7%, Sekisui Kasei Products 27.4%, and Dainippon Toryo 17.6%.
Among examples of stocks whose prices rose despite weak earnings, semiconductor-related stocks such as Advantest and Kioxia announced upward revisions in some cases, but there were many instances of a broad sell-off overall. Cybersecurity-related stocks were generally sold, and profit-taking also spread to related stocks, including cloud companies.
This week, market risk aversion could intensify depending on the outcome of the US midterm elections, and some expect funds to move into domestic-demand defensive stocks and deeply undervalued stocks. Bank stocks also rose at times depending on developments at the Bank of Japan, but a cautious stance is expected to continue overall.