Stocks Up On Economic and Earning Data

Weekly Wrap Content for the week of Oct 15:

1. Week 41 major indexes performance;

2. Week 41 US sector indexes performance;

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

U.S

For the week ended Oct 15, the three major U.S indexes rebounded, SPX closed at its four-week high, returning to within 2% of all-time highs, as earnings season kicked off into high gear, thanks to strong results from the big banks. Improving sentiment has favored cyclical assets, with value and small-caps, along with the energy and financial sectors, leading the way recently. Refer to major indexes’ weekly performance table below.

Key highlights for the week/coming week:

1.    Recent market focus: high energy prices and continued pressures from supply chain disruptions. Global oil prices continued their climb to a three-year high. Supply chain issues continue to grab headlines in the form of warnings from retailers struggling to fill shelves ahead of the holidays, while Apple scaled back its expectations for iPhone sales due to semiconductor chip shortages. 

2.    Fed policies amid rising inflation data continue to be under spotlight. It’s expected the Fed to begin tapering as early as next month, with gradual winddown in bond purchases by mid-2022. But actual near-zero interest rate should be maintained for at least another year or so. This means monetary policy will remain supportive for a bull market going forward for some time. 

3.    Initial jobless claims reported on Thursday rallied stocks with biggest gain since March, as the number had fallen to 293k, a new pandemic-era low. For perspective, initial claims peaked at a whopping 6.15million in early Apr 2020, when unemployment rate just below 15%.

For the week, among 11 SPX sectors, Materials(XLE) and the smaller Real Estate (XLRE) stocks led the gains as long-term bond yields fell, Consumer Discretionary(XLY) shares got a boost from Tesla, Communication Services(XLC) shares lagged. Refer to SPX sector indexes weekly performance below.

Technically, all three major indexes' weekly long-term uptrend remains well intact,  SPX index stood above all its 20 and 50dma, and within 2% to its all-time high.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

For the week, mainland Chinese stocks ended nearly unchanged ahead of next week’s quarterly GDP report. As the Shanghai Composite Index (SSEweekly chart) dipped 0.59%.  

Energy crunch. Investors have been spooked by a deepening energy crisis as cold weather swept into much of the country and power plants scrambled to stock up on coal, sending prices of the fuel to record highs. Oil and natural gas prices, which have also soared to multiyear highs, have also sent jitters across China, a net energy importer.

Property developer under stress. Despite continued concerns about China’s property sector, a central bank official said that the spillover effect of China Evergrande Group’s debt problems on the banking system is controllable and that risk exposures are not big. However, as China Evergrande failed to pay nearly USD 150 million worth of coupons on three bonds since Sep. Investors are now awaiting several key dates when Chinese property companies are due to make payments on their debt, with at least USD 92.3 billion of bonds coming up for payment in 2022, according to Refinitiv data.

Hang Kong(.HSI weekly chart) stocks rebounded for the 3^rd week, recoup most of its losses since mid-Sep.

Technically, .HSI index still trading under the downtrend channel, hitting its technical resistance at 50dma 25423 while also near its downtrend resistance at around the level. A break above its 50dma will be a positive sign for further rebound going forward.

Singapore

STI Index(STI weekly chart) ended the week nearly recouping its three-month high at around 3200 level. STI index has appeared very resilient recently despite that other regional key markets were quite volatile.