[Good Morning Market] FOMC Caution Persists... "Focus on National Growth Fund, Semiconductors, and Other Themes"

On December 10, the South Korean stock market is expected to remain in a wait-and-see mode ahead of the U.S. Federal Reserve's (Fed) key interest rate decision scheduled for the following day.

On December 9 (local time), the New York stock market in the United States showed limited fluctuations amid caution over the Fed's upcoming rate decision and changes in the labor market. The Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 47,560.29, down 179.03 points (0.38%) from the previous trading day. The S&P 500 Index, which centers on large-cap stocks, fell by 6 points (0.09%) to 6,840.51, while the tech-heavy Nasdaq Composite Index rose by 30.582 points (0.13%) to close at 23,576.486. The Russell 2000 Index, which tracks small- and mid-cap stocks, also rose by 0.29%.

The Fed will hold its final Federal Open Market Committee (FOMC) meeting of the year over two days starting today to decide on the benchmark interest rate. The market is placing high odds on a third consecutive 0.25 percentage point rate cut at this meeting. According to the CME FedWatch Tool, the interest rate futures market reflected an 87.4% probability of a 0.25 percentage point cut on this day.

However, with the view that a December rate cut has already been priced into the stock market, market attention is shifting from whether there will be a rate cut to the Fed’s message on the future path of monetary policy. Despite signs of a slowdown in employment, inflation remains above the Fed’s 2% target, and opinions within the FOMC are divided between further cuts and holding rates steady. In particular, focus is on whether Fed Chair Jerome Powell, during his press conference, will be able to quell internal divisions and implement a strategy to raise the bar for additional rate cuts after the initial cut. This potential adjustment in the pace of rate cuts could lead to a rebound in Treasury yields and the dollar, as well as limited fluctuations in the stock market.

The employment data released on this day was interpreted as supporting the Fed’s cautious approach. According to the U.S. Department of Labor’s October Job Openings and Labor Turnover Survey (JOLTs), the number of job openings increased to 7.67 million, reaching a five-month high compared to the previous month. However, hiring, which reflects the real vitality of the labor market, decreased, while layoffs increased, indicating that the labor market remains sluggish. Notably, voluntary resignations, where workers leave jobs by choice, declined from the previous month, while involuntary separations such as layoffs reached their highest level since early 2023, suggesting that bargaining power in the labor market has shifted to employers. This was also seen as evidence that the U.S. economy is experiencing a soft landing rather than a sharp downturn.

By sector, banks and some cyclical stocks were weak. JP Morgan fell by more than 4% due to concerns over rising costs, weighing on the overall financial sector. In contrast, some growth stocks fluctuated depending on individual factors, and ahead of the FOMC, stock movements were more pronounced at the individual stock level than at the index level. The Philadelphia Semiconductor Index edged down by 0.04%, closing nearly flat.

In the domestic market, the previous day’s mixed performance among semiconductor, automobile, shipbuilding, and defense sectors is expected to continue, making a clear direction for the index unlikely. With trading volume declining, movements are expected to center on individual themes rather than the overall index. Lee Sunghoon, a researcher at Kiwoom Securities, explained, "A wait-and-see approach will likely persist, with investors watching for the FOMC's key interest rate decision and Oracle's earnings announcement scheduled for early tomorrow morning."

He added, "Today, the National Growth Fund is being launched, and there is news that SpaceX in the United States is planning an initial public offering (IPO) in 2026, so there are still a number of theme-driven catalysts. As a result, price changes in semiconductor materials, components, and equipment as well as aerospace-related theme stocks will be key issues to watch."