[Good Morning Market] FOMC Confirms Hawkish Stance

[Asia Economy Reporter Junho Hwang] On the 16th (Eastern Time, US), the US stock market closed mixed, influenced by the Federal Open Market Committee (FOMC) minutes confirming a hawkish stance once again and economic indicators showing signs of recovery. With the conflict between Russia and Ukraine still unresolved, the domestic stock market is also expected to be affected by these factors.

According to the minutes of the January FOMC regular meeting released the previous day, the majority of attendees at the Federal Reserve (Fed) believed that if inflation does not decline as expected, it would be appropriate for the committee to remove accommodative policies at a faster pace than currently anticipated. They also mentioned that "it would be reasonable to raise the federal funds rate target at a faster pace than the period since 2015." Regarding balance sheet reduction, attendees stated that "a significant reduction in the balance sheet would be appropriate given the large amount of securities currently held by the Fed."

Sangyoung Seo, a researcher at Mirae Asset Securities, said, "Due to the assessment that the possibility of aggressive Fed monetary policy has weakened, the US stock market narrowed its losses or succeeded in turning upward," adding, "The ongoing friction surrounding Ukraine is also a burden."

The economic indicators released that day suggested that the economy is showing signs of recovery. According to the US Department of Commerce, retail sales in January increased by 3.8% from the previous month to $649.8 billion. Retail sales, which had decreased by 2.5% in December last year, returned to a recovery trend. This also exceeded the market expectation of 2.1%.

On the New York Stock Exchange that day, the Dow Jones Industrial Average closed at 34,934.27, down 54.57 points (0.16%) from the previous day. The tech-heavy Nasdaq closed at 14,124.09, down 15.66 points (0.11%). The S&P 500 rose 3.94 points (0.09%) to 4,475.01. The small-cap focused Russell 2000 index closed at 2,076.46, up 55.67 points (2.76%).

Geopolitical tensions surrounding Ukraine remain. The Russian Ministry of Defense previously announced that Russian military units that completed training in Crimea are returning to their original garrisons. It also expressed strong dissatisfaction with the West's continuous emphasis on the imminent invasion of Ukraine by Russia.

Jiyoung Han, a researcher at Kiwoom Securities, stated, "The domestic stock market is expected to see the relief from the January FOMC minutes act as a factor for market gains, but after the short-term surge in the previous trading day, a partial pause is expected." She added, "Since geopolitical tensions and related uncertainties between Russia and Ukraine continue, the overall index's upside will be limited, showing differentiated flows among sectors."