[Good Morning Stock Market] US Stocks Rebound After FOMC... Korean Market Expected to Consolidate Downside

Nasdaq Up 1.4%, S&P 500 Closes 1% Higher
Fed Holds Rates Steady and Maintains Rate Cut Outlook
Korean Stock Market Expected to Consolidate Downside Amid Impeachment and Short Selling Issues

The U.S. stock market digested the Federal Open Market Committee (FOMC) meeting steadily and closed higher across the board. However, there are forecasts that the uncertainty surrounding mutual tariffs could still hinder a full return to a sustained upward trajectory. The domestic stock market is expected to consolidate downward amid volatility due to issues such as U.S. President Donald Trump's tariff policies and the resumption of short selling.

On the 19th (local time), the New York Stock Exchange mostly closed up around 1%. The Dow Jones Industrial Average ended the day at 41,964.63, up 0.92% from the previous day. The S&P 500 index closed at 5,675.29, up 1.08% from the previous day. The tech-heavy Nasdaq index closed at 17,750.79, rising 1.41% from the previous day.

This is interpreted as the effect of the U.S. central bank, the Federal Reserve (Fed), maintaining its existing monetary policy of "two rate cuts within the year" despite the impact of the Trump administration's tariff policies.

At the FOMC meeting that day, the Fed kept the benchmark interest rate unchanged at 4.25?4.5% as expected. In the revised economic projections (SEP), the U.S. growth forecast for this year was lowered from 2.1% to 1.7%, while the inflation forecast was raised from 2.5% to 2.7%. Nevertheless, the Fed maintained its existing monetary policy outlook of two rate cuts within the year.

Fed Chair Jerome Powell stated at the press conference that the recent increase in economic forecast uncertainty is due to tariffs, and he assessed that the impact of tariffs on inflation would be temporary. Although the probability of a recession has slightly increased, it remains low, and he dismissed concerns about stagflation (economic stagnation amid high inflation). He also expressed that the Fed does not want to respond to weak sentiment indicators based on surveys and that real economic data remains robust. The market interpreted Powell’s stance as a dovish (monetary easing-favoring) signal and reacted accordingly.

Since the direction of real economic data will be influenced primarily by the Trump administration’s tariff policies, which are taking full effect from this month, the market is expected to focus more on statements from the Trump camp rather than speeches by Fed officials for the time being. Ji-young Han, a researcher at Kiwoom Securities, said, "Considering that individual investors’ sentiment indicators are near historic lows, the 12-month forward price-to-earnings ratios (PER) of the Nasdaq and big tech stocks have undergone sharp adjustments, and the FOMC was smoothly conducted, the U.S. stock market will secure downside rigidity going forward." She added, "The index is likely to remain capped on the upside and gradually raise its lows until the end of next month, when uncertainties over the Trump administration’s tariff policies and big tech companies’ first-quarter earnings announcements are concentrated."

The domestic stock market is also expected to show a similar trend, as it is a country heavily affected by the Trump administration’s tariff policies. Additionally, Korea has its own events such as the Constitutional Court’s impeachment ruling and the resumption of short selling. Ultimately, the current market characteristics, such as rapid sector rotation, are expected to persist for the time being. The researcher explained, "At this point, rotation opportunities will relatively concentrate on leading stocks compared to other sectors," adding, "The traditional semiconductor sector, which is the existing leading sector with expectations of industry recovery, will be an alternative."