Stocks Retreated on Inflation and Interest Rate Fears

 Weekly Wrap Content for the week of Oct 1:

1. Week 39 major indexes performance;

2. Week 39 US sector indexes performance;

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

4. Major indexes monthly performance for Sep

U.S

For the week ended Oct 1, U.S stocks experienced their first noticeable dent in some time, as a jump in interest rates reflected inflation concerns and expectations for the Fed to begin tapering this year. The return of rising-rate anxiety spurred the first 5% market drop in a year since Sep. A Friday rally moderated the losses with SPX ended with a 2.2% decline for the whole week. Refer to major indexes’ weekly performance table below.

Historical data shows Sep month has been the weakest month of the year for the stock market. This trend appears to have held well for this year. Refer to below major indexes monthly performance for Sep. All in red except for STI and SSE.

Key highlights for the week:

1.     Rising U.S Treasury yields seemed overhang sentiment throughout the week. 10-year rates have jumped from 1.30% on September 15 to as high as 1.54% last week, reflecting a renewed concern over inflation pressures and reduced Fed-stimulus expectations.

    2.   Debt ceiling and stimulus uncertainty also weigh sentiment. A short-term spending bill was passed to avert another partial shutdown of the U.S government. No progress was made in raising the fed debt limit. 

    3. Supply chain constraints feed inflation worries. Shares in Nike, Bed Bath & Beyond, and Kohl’s fell sharply after the companies reported stressed supply chains and higher labor costs ahead of the holiday shopping season. The recent surge in oil prices, which benefited energy stocks, also raised broader inflation worries.

Among 11 SPX sectors, growth stocks fared worse than value shares. Energy(XLE) and Financials (XLF) outperformed, while Healthcare(XLV) and Technology(XLK) stocks lagged. Refer to SPX sector indexes weekly performance below.

Technically, all three major indexes' weekly candlesticks appear bearish but while their long-term uptrend remain well intact. SPX has its 20dma crossing down 50dma which is bearish in short term.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland Chinese stocks (SSE weekly chart) ended a holiday-shortened week lower. China’s markets were closed Friday for the weeklong National Day holiday starting on October 1 and will resume trading on next Friday.

Positive news concerning indebted property developer China Evergrande Group supported investor sentiment. On Wednesday, Evergrande said that one of its units would sell roughly 20% of its stake in Shengjing Bank Co. to a state-owned enterprise for USD 1.5 billion to help reduce its debt load. News of the asset sale came as Beijing is prodding government-owned companies and state-backed property developers to buy some of Evergrande’s assets, Reuters reported.

Separately, the People’s Bank of China (PBOC) pledged to ensure a “healthy property market” and to protect homebuyers’ rights in a statement following the central bank’s quarterly monetary policy committee meeting.

Hang Kong(.HSI weekly chart) stocks rebounded in the holiday-shortened week, following two-week sharp decline. HK closed for China National Day holiday on Friday and will resume trading on Monday.

Technically, .HSI index rebounded from its major support level at around 24,000 as we expected last week, going forward, it’s expected the index downside is limited.

Singapore

STI Index (STI weekly chart) ended the week with moderate loss, recorded 3^rd week down in a row but it appears the selling pressure is under control. The coming week, continues to watch out for major support level around 3060-3050.