Earning Season Starts, Stocks Post Third-Weekly Gains

Weekly Wrap Content for the week of Oct 22:

1. Week 42 major indexes performance;

2. Week 42 US sector indexes performance;

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

U.S

For the week ended Oct 22, U.S. SPX, DJI index all moved to record highs, seemingly helped by a series of positive earnings surprises. Further reflecting the strong investor sentiment, the Cboe Volatility Index (VIX) also fell to its lowest level since the beginning of the pandemic. Equities have gained almost 6% this month, fully recovering from last month's losses. Refer to major indexes’ weekly performance table below.

Key highlights for the week/coming week:

1.    The 10-year yield hit highest since May amid concerns around persisting inflation (market-implied inflation expectations hit decade highs last week). 

2.    Hopes for additional fiscal stimulus also appeared to bolster sentiment. Negotiations continued between Democrats in the U.S. Senate over the size of the Biden administration’s proposed social infrastructure bill. 

3.    Earnings for big tech names in coming week will be watched closely, such as Facebook, Google, Microsoft, Macdonald’s Coca Cola, Apple, Amazon etc.

For the week, among 11 SPX sectors, Real Estate( XLRE) and Healthcare(XLV) led gains. Communication Services(XLC) were strong through much of the week, but social media stocks dropped sharply on Friday following downward guidance, which the company blamed on new privacy settings on Apple’s iPhones.

Technically, all three major indexes weekly in a well uptrend. DJI and SPX hit record new highs and Nasdaq just 2% below its all-time high.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

For the week, mainland Chinese stocks advanced as the Shanghai Composite Index (SSE weekly chart) added 0.3% after officials sought to calm fears about the property sector and China Evergrande Group made a delayed coupon payment, sparking a rally in the cash-strapped developer’s bonds and shares. Chinese stocks got off to a weak start after data released Monday showed that the country’s gross domestic product (GDP) rose a lower-than-expected 4.9% in the third quarter from a year ago as power shortages and property sector curbs reined in expansion. The latest quarterly growth was the weakest since the third quarter of 2020 and considerably slower than the second quarter’s 7.9% pace.

Hang Kong(.HSI weekly chart) stocks rebounded for fourth week, closed at six-week high.

Technically, .HSI index crossed and stayed well above its 20 and 50dma this week, which is a bullish sign for continuous recovery. .HSI index is the only index has a negative return YTD with 4.05% down(refer to the above index weekly performance table). Plenty of room to upside.

Singapore

STI index(STI weekly chart) ended at 3^rd weekly gain in a row, closed at 5 month high. Technical bullish with further upside move expected.