Inflation Worries, Resurging of COVID-19 Cases Drag Stocks Down

Summary of content for the week of May 14:

1. Week 19 major indexes performance;

2. Week 19 US sector indexes performance;

3.Major indexes weekly charts of support and resistance levels;

U.S

U.S major indexes lower for the week ended May 14, as investors confronted stark signs of higher inflation, but a late rally moderated the week’s declines. DJI and SPX slipped back from record highs and technology-heavy Nasdaq index is the weakest among all three, closed down for 3^rd straight week.

Weakness in Tesla weighed especially on consumer discretionary shares, and Elon Musk’s announcement that electric vehicle maker would no longer accept Bitcoin as payment because of its carbon footprint sparked a sell-off in the cryptocurrency.

Major events happened during the period:

1.    Core inflation sees biggest monthly jump since 1982. Released on Wed, core CPI(excluding food and energy) jumped by 0.9% in Apr, the most in nearly four decades and roughly triple consensus estimates. DJI reacted by having its worst since last Oct, SPX also had its worst day since Feb this year. Stocks recovered some momentum on Thu and Fri, seemingly helped by better weekly jobless claim data. 

2.    Fed stress inflation is likely to prove temporary and made repeated assurances that it would not prompt any sudden shift in monetary policy. The Fed is in a dilemma now as the U.S economy doesn’t look good as measured by both manufacturing and service PMI readings and its job market isn’t improving. (refer to previous week’s post)

IT and other growth-related stocks led the way to rebound on Thu and Fri after falling sharply in the first half of the week. On weekly basis, Consumer Staples( XLP) and Financials(XLF) underperformed, while Technology(XLK) and Consumer Discretionary(XLY) lagged. Refer to below SPX sector indexes weekly performance table.

Technically, the three major indexes weekly charts remain on strong uptrend. Refer to below major indexes weekly charts.

China/HK

Chinese stocks rose strongly for the week. The benchmark SSE Index gained 2.1%, was the best weekly performer in my major indexes table below.

Chinese technology stocks listed in HK continued under selling pressure this week as the authority’s regulation risk of antitrust still high on top Chinese tech companies such as Meituan 3690HK, Tencent 700HK etc. The technology index ETF- CSOP Hang Seng TECH Index ETF 3033HK, dropped to new multi-month low since last Nov. I believe it’s a good opportunity to consider those top players in tech, as the technology stocks will still be the key drivers in new economy transformation at all times.

Singapore

STI index had its worst weekly loss of 4.54% since last Mar when pandemic just breakout, as the government announced fresh lockdown rules on Friday to fight rising Covid-19 cases raised concerns about the mending economy. Technical, STI index has broken down 3100 support which is bearish, immediate next support at 3000 level.