[Good Morning Stock Market] US Stocks 'Shake' Amid FOMC Uncertainty... Concerns Over Increased Volatility in Korean Stocks Rise

All Three Major US Indexes Drop About 1%... Uncertainty Rises Ahead of December FOMC
Omicron Concerns Resurface as Negative Factor... Also Impacting Domestic Stock Market

On the 9th (local time), traders are handling their tasks on the trading floor of the New York Stock Exchange (NYSE) in the United States. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] As the U.S. stock market faces increased profit-taking ahead of the Federal Open Market Committee (FOMC) meeting, concerns over the new COVID-19 variant 'Omicron' have resurged, causing all major indices to decline. The domestic stock market is also expected to experience some hesitation and increased volatility among individual stocks due to these influences.

On the 13th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.89% from the previous trading day to close at 35,650.95. The S&P 500 dropped 0.91% to finish at 4,668.97. The tech-heavy Nasdaq plunged 1.39%, closing at 15,413.28.

◆Sangyoung Seo, Researcher at Mirae Asset Securities= Although the Organization of the Petroleum Exporting Countries (OPEC) stated in its oil market report that the Omicron impact is mild and short-term, the World Health Organization (WHO) emphasized that significant uncertainties surround Omicron and that more cases could emerge, posing a global risk. Following the first Omicron death in the UK, British Prime Minister Boris Johnson expressed concern, saying, "We need to change the perception that Omicron symptoms are mild." In China, new Omicron cases have also been reported, reigniting fears of contagion.

Amid this atmosphere, the U.S. stock market saw broad selling pressure across technology stocks. Although a hawkish FOMC is already anticipated, concerns appear to stem from the possibility that the Federal Reserve's rate hike schedule could accelerate. Sustained high inflation and a faster-than-expected pace of rate hikes have raised worries about a slowdown in durable goods consumption, including automobiles.

The late-session decline in the Korean stock market the previous day also seems to be due to such cautious selling. The underperformance of thematic stocks like electric vehicles, metaverse (extended virtual worlds), and non-fungible tokens (NFTs), which have been focal points in the U.S. market, ahead of the FOMC, particularly weighed on the domestic market. Added to this is the Omicron concern, which is expected to dampen overall investor sentiment.

◆Jiyoung Han, Researcher at Kiwoom Securities= Market participants are increasingly cautious ahead of the December 15th (local time) FOMC announcement. The FOMC meetings in March, June, September, and December, which reveal economic and inflation forecasts along with the dot plot, tend to create turning points in major financial markets, making them more significant than other FOMC meetings. With tapering (reduction in asset purchases) acceleration now a foregone conclusion, uncertainty regarding the acceleration of rate hikes is also rising.

Ultimately, until the December FOMC results are released, the market is expected to enter a phase of increased short-term volatility. A strategy of responding after confirmation rather than prediction is necessary. The domestic stock market is also expected to show a downward trend influenced by the weakness in the U.S. market caused by FOMC-related uncertainties. Downward pressure is likely to increase, especially on high-growth technology stocks, similar to the U.S. Additionally, as government policy uncertainties regarding the regulation of 'play-to-earn (P2E)' games for reasons such as gambling are reemerging in Korea and China, caution is warranted regarding increased volatility in related thematic stocks such as NFTs and the metaverse.

This content was produced with the assistance of AI translation services.