Stocks Down on Inflation Concerns

Weekly Wrap Content for the week of Nov 12:

1. Week 45 major indexes performance;

2. Week 45 US sector indexes performance;

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

U.S

For the week ended Nov 12, the major indexes retreated from record highs, as investors confronted data showing the highest inflation in three decades. On Tuesday, the S&P 500 Index registered its first decline in nine sessions, ending its longest winning streak since 2017. The major indexes fell mid of week following news that the consumer price index (CPI) jumped 0.9% in October, well above consensus expectations of around 0.6%. The increase brought the year-over-year CPI increase to 6.2%, the highest since December 1990. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/coming week:

1.    The headline CPI reading came in at 6.2% year-over-year, the highest level since 1990, while the PPI reading was 8.6%, the highest on record since 2010. 

2.    This week’s notable IPO of electric vehicle maker Rivian—the largest for a U.S. company since Facebook’s in 2012.

Sectors in play and what are the stocks to benefit in inflationary environments.

Historically, one of the best hedges to inflationary pressure is to invest in equities, which tend to outpace the rate of inflation over time. Consider this year, for example: While inflation is up 6.2% year-over-year, the S&P 500 is up 24.7%. Value and cyclical sectors like financials, energy and industrials tend to outperform.

SPX 11 sectors performance for the week, the small materials sector(XLB) performed best, seemingly helped by the recent passage of the Biden administration’s USD 1.2 trillion infrastructure bill in the House of Representatives. Consumer discretionary(XLY) shares led the declines in the S&P 500 following a steep fall in Tesla, after CEO Elon Musk announced plans to sell some of his shares. Energy(XLE) shares were also especially week as oil prices backed away from recent peaks. Refer to below SPX sector ETF’s weekly performance table.

Technically, all three major indexes hit fresh record highs, with very bullish uptrend.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

For the week, the Shanghai Composite Index (SSE weekly chart) added 1.4% which was the biggest weekly gain in two months, amid speculation that Beijing would announce easing measures to help indebted property companies as the specter of defaults continued to loom over the sector.

The previous week, cash-strapped developer China Evergrande Group averted a last-minute default for the third time in the past month. Property is a key pillar of China’s economy, and worries have grown that the sector’s financial woes could spill into other sectors.

Hang Kong(.HSI weekly chart) stocks climbed 1.8%, the most in three weeks, rebounded after its two-week losing streak.  

Singapore

STI index(STI weekly chart) closed retreated after hitting new intra-week high since Jan 2020, Singapore local banks led the rally and expected to continue outperform in the inflationary environments.