Stocks Post Fresh Records Following Upbeat Labor Report

Weekly Wrap Content for the week of Nov 5:

1. Week 44 major indexes performance;

2. Week 44 US sector indexes performance;

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

U.S

For the week ended Nov 5, the major indexes finished higher, posting a fifth-straight week of gains, while notching fresh record highs in the process. The moves came following an upbeat October labor report that showed a larger-than-expected increase in jobs created and a decline in the unemployment rate. Refer to major indexes’ weekly performance and monthly performance tables below.

Key highlights for the week/coming week:

1.    Fed November 2-3 meeting. Will begin to wind down(“taper”) its monthly pace of bond purchases, currently at $120 billion, by $15 billion per month. At this pace, the Fed will phase out the purchases entirely by next June. However, last week's message from the Fed calmed some nerves, as Chair Powell reiterated the view that inflation pressures are expected to be transitory (though with less certainty) and that the Fed will be patient on rate hikes. 

2.    Data shows the last Fed tapering in 2013 had little impact on equity markets. While volatility increased as former Chair Bernanke hinted at a step-down in asset purchases, equities performed well during the 10 months of tapering. The S&P 500 rose 9.5%, with the health care, real estate and utilities sectors leading the market gains. 

3.    Nonfarm payroll data released on Friday shows the U.S. economy added 531,000 jobs in October, the most since July and the first upside surprise in three months. 

4.    Expected favorable seasonality could help to add to this year’s tally. Historical data of SPX monthly performance since 1989 shows the two-month stretch between November and December has been rewarding for investors, with above-average equity-market gains and the highest chances of positive returns, at 78% and 81% chances of positive returns, with average gains at 2.1% and 1.6% respectively.

For the week, Technology stocks and small-caps were particularly strong, and growth shares outperformed value stocks. Oil prices dropped from their recent highs after Biden administration officials mentioned the possibility of releasing supply from the strategic petroleum reserve, hurting energy sector stocks. Among 11 SPX sectors,  Consumer discretionary(XLY) and Technolgy(XLK) shares fared best, Financials(XLF) and Healthcare(XLV) lagged. 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) retreated 1.6% as headlines about the beleaguered property sector and a growing COVID-19 outbreak across the country dampened sentiment. Renewed restrictions in many places raised worries about supply chain constraints dampening the country’s growth outlook as infections spiked near a three-month high.

China’s property sector is grappling with a deepening liquidity crisis reflected in a wave of offshore debt defaults, credit rating downgrades, and selling in the stocks and bonds of major developers. Seven of the top 10 China-listed developers by revenue recorded steep declines in profitability in the July-to-September quarter, which has increased pressure on Beijing to support the stressed sector. Kaisa Group Holdings became the latest developer in China’s USD 5 trillion property sector to reveal that it was having debt problems.

On the economic front, China’s official manufacturing Purchasing Managers’ Index fell to a worse-than-expected 49.2 in October from 49.6 in September, below the 50-point mark separating growth from contraction. October marked the second month that factory activity contracted and was the latest sign that the economy was losing steam after a strong recovery from the pandemic.

Hang Kong(.HSI weekly chart) stocks closed with 2^nd weekly loss, and was the worst performing index for the week.

Singapore

STI index(STI weekly chart) closed at a new high since Jan 2020, renewed its strong upward move after the previous week’s pause. Singapore local banks led the rally and are expected to continue to outperform in anticipating rising rates.