Fed Get Ready for First Rates Raise in March

Wishing All Readers a Happy and Prosperous Tiger-Year Ahead!

Weekly Wrap Content for the week of Jan 28:

1. Week 4 major indexes performance;

2. Week 4 US sector indexes performance;

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

U.S

Stocks closed weekly up for the first time after a 3-week down streak. After a volatile week, the market did hold on to a solid rally on Friday afternoon (Jan 28) – with the S&P ending the week up around 0.8% – but the index remains down around -7.0% for the year (although still up nearly 95% since the March 2020 lows). All three major indexes able to claw out of negative territory on a weekly basis. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Key takeaways of Fed meeting in the week: 1) Fed will begin raising rates at Mar meeting. And its assets purchase tapering is expected to end in Mar. 2) Inflation will be key risk to Fed’s outlook. 

2.    Historical statistics show stocks can perform through the start of Fed tightening. Over the last five Fed cycles, the average return in the year after rate hikes started was 5%. But market’s volatility will increase, meaning market won’t go up smoothly like 2021, do expected big corrections thus more volatile. 

3.    Earning reports and outlooks: 4Q 2021 earnings season is now underway. With about 33% of S&P 500 companies having reported, earnings growth for the quarter has come in above expectations, at a solid 24% year-over-year. Dow member Apple's record results a standout, along with fellow Dow component Visa.

SPX sectors in play

Six out of 11 SPX sectors closed positive this week. Energy(XLE) stocks rallied as crude oil prices pushed above USD 87(WTI) per barrel, driven in part by the continued massing of Russian troops along the border with Ukraine. Technology(XLK) also among top gainers lifted up by Apple share price. Industrials(XLI) and Consumer Discretionary(XLY) lagged.Refer to below sector indexes weekly performance table.

Technically, all three major indexes are trading under their 200dmas respectively despite strong Friday rebound. Expected they will continue rebound coming week(s)… hopefully.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese stocks slumped ahead of a weeklong Lunar New Year holiday as Jerome Powell’s hawkish tone following the U.S. Fed’s policy meeting raised expectations for faster monetary tightening.

The Shanghai Composite Index (SSE weekly chart) lost 4.6% for the week as traders factored in as many as five rate hikes in the U.S. this year, a development that would impact the offshore borrowing plans for many Chinese companies. The Chinese blue-chip index CSI 300, which struck a 16-month low during the week, is now in a bear market, having fallen more than 20% from its February 2021 peak. China A-shares markets will close for CNY holiday for the whole week from 31 Jan- 4 Feb.

In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) fell 5.7% for the week, capping off its worst week since August amid global investor jitters sparked by rising expectations of monetary tightening by the U.S. Federal Reserve. The .HSI index gave back its previous two weeks gains. Expected the index will follow Wall Street’s strong rebound on Friday in coming week. HK markets will close from 1-3 Feb for CNY holiday, and resume trading on Fri. 31 Jan is half-day session trading, will close in the afternoon.

Singapore

STI index(STI weeklychart) closed first weekly down after 4-week up in a row, technically STI index just sitting above its 20dma support line after this week’s profit taking, uptrend remains intact for now. Singapore market will close on 1-2 Feb for CNY holiday, and it’s a half day trading on Monday, market will close early, no afternoon trading session.

Interest Rate Fears Weigh Heavily on Stocks, Nasdaq Fell into Correction

Weekly Wrap Content for the week of 3:

1. Week 3 major indexes performance;

2. Week 3 US sector indexes performance;

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

U.S

Stocks slumped into their 3^rd consecutive weekly loss over the holiday-shortened week. Rising interest rate fears and growth worries pushed the S&P 500 Index to its biggest decline in more than 14 months.  The Nasdaq Composite index slumped roughly 7.6%, its biggest weekly drop since the start of the pandemic. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Sentiment turned sour, as speculation the Fed will announce a 50-basis-point (0.50%) increase in the Fed funds rate at its Mar meeting, instead of the usual 25-basis-point in recent years. Market are pricing at least 100 basis points in 2022. 

2.    Latest housing market data were mixed. Housing starts and permits in Dec surprised to the upside, while existing home sales slumped over the month. Weekly jobless claims rose to 286k, the most since mid-Oct, the unexpected jump seemed to have the biggest impact on markets. 

3.    10-year Treasury yield hit 1.9% on Wed-its highest level since late 2019-but fell back sharply in the wake of Thur’s weaker-than-expected jobless claims report.

SPX sectors in play

All 11 SPX sectors closed under water this week, with Consumer Discretionary (XLY) and Technolgy(XLK) fell the most for the week-8.2% and 6.9% respectively, and also the worst sectors with decline of 11.8% and 11.2% YTD. 

Weakness in semiconductor shares weighed on technology stocks, while weakness in automakers and home improvement retailers dragged down the consumer discretionary sector. Declines in financial giants JPMorgan Chase and Goldman Sachs took a toll on financial services shares. A more than 20% decline in Netflix shares following its fourth-quarter earnings report contributed to the indexes’ losses on Friday. Refer to below sector indexes weekly performance table.

Technically, all three major indexes dropped below their 200DMAs- typically in bears' teritory.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

The Shanghai Composite Index (SSE weekly chart) edged up 0.1% for the week, as the government stepped up monetary easing measures and signaled additional support for the beleaguered property sector.

Last Monday, the People’s Bank of China (PBOC) unexpectedly reduced the interest rate on one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.85%, the central bank’s first reduction since April 2020.

In economic readings, China’s gross domestic product expanded at better-than-expected 4% in the fourth quarter of 2021, slowing from the third quarter’s 4.9% expansion pace. The data suggest worsening downward pressure, especially in consumption and property trends, though infrastructure investment showed some improvement.

In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) continues its rebound into 4^th week, with weekly gain of 2.4%. The .HSI index closed at its two-month high, seemed unaffected by rout in the U.S stocks.

Singapore

STI index(STI weeklychart) rallied into 3^rd week, passed through multi-year high in 2021 peak of 3273.54 and 2020 peak of 3283.89 level. The index displayed remarkable resilience and defying losses across most major bourses, mainly driven by banking and financing stocks.

For the first three weeks of 2022, STI has continued its strong momentum built on since last year, rallied 5.4%. STI technical indicators appear firmly bullish, its price level trading above all major moving averages (20/50/200 daily MA). Going forward, we think any short-term pull-back to near its moving averages would provide good entry opportunities for bulls. STI’ near term target/resistance level at around 3380-3400 area.

Inflation and Rate Worries Weigh as Earnings Season Begins

Weekly Wrap Content for the week of 2:

1. Week 2 major indexes performance;

2. Week 2 US sector indexes performance;

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

U.S

Stocks recorded their 2^nd consecutive weekly loss to start the year- and the technology-heavy Nasdaq Composite its third – as the unofficial start of earnings season began. Financials shares came under pressure on Friday as JPMorgan Chase and Citigroup, typically among the first major companies to release results, reported lower profits in the fourth quarter, Wells Fargo on the other hand, jumped up new high since Jan 2018. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Stocks started the week on a down note on news that more Wall Street analysts were expecting the Federal Reserve to hike rates four times in 2022—a consensus implied in futures markets. 

2.    Overall consumer prices reported risen to 7% yoy, the largest gain on a 12-month basis since June 1982. Core inflation excluding food and energy rose 5.5%, the most since February 1991. Core producer prices, reported Thursday, rose 8.3%, the most in records going back to 2011. 

3.    The week’s biggest surprise, arguably, was a 1.9% drop in retail sales in December—a decline that would be magnified by excluding the volatile auto market and adjusting for inflation. 

4.    Weekly jobless claims rose unexpectedly to 230,000, the highest number since mid-November. The University of Michigan’s index of consumer sentiment ticked down to a new pandemic-era low of 73.2, with many surveyed citing inflation worries. 

5.    After climbing above 1.80% during intraday trading Monday, the yield on the benchmark 10-year U.S. Treasury note slid to 1.74% by Friday morning, as longer-term U.S. government debt rallied amid wavering risk sentiment.

SPX sectors in play

Among the 11 SPX major sectors, Financials(XLF) shares lagged, along with Utilities(XLU), real estate(XLRE), and Consumer Discretionery(XLY).  Energy(XLE) shares outperformed as oil prices continued their climb back to late-October highs. Refer to below sector indexes weekly performance table.

Technically, all three major indexes uptrend was well intact.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

The Shanghai Composite Index (SSE weekly chart) fell 1.6% for the week, weighed by headlines about refinancing difficulties in the country’s troubled property sector.

China’s largest banks have grown more selective about funding real estate projects by local government financing vehicles, while several developers scrambled to obtain creditors’ consent for maturity extensions and exchange offers, Bloomberg reported. Other developers have intensified fundraising campaigns as traditional financing routes like presales have dried up.

A severe and prolonged downturn in China’s real estate sector would have significant economy-wide reverberations, the World Bank warned in its Global Economic Prospects report.

On the pandemic front, China suspended dozens of international flights and issued more restrictions in response to the global surge in omicron cases. Hong Kong, which had reported no local infections for months, reimposed some social and travel restrictions after a string of positive cases, dealing a setback to the city’s reopening hopes. Shanghai curbed tourist activity as it rushed to head off local infections as imported cases rose.

In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) jumped the most in 14 months to end up 3.8%. The Hang Seng Tech index rebounded 4.8% to its four-week high, after hit fresh new low previous week.

Singapore

STI index(STI weekly chart) rallied for 2^nd week, pushed through its 2021 high of 3273.54 and hit two-year new high since Jan 2020. The index displayed remarkable resilience and defying losses across most major bourses, mainly driven by banking and financing stocks.

Stocks Retreat as Bond Yields Advance

Weekly Wrap Content for the week of 1:

1. Week 1 major indexes performance;

2. Week 1US sector indexes performance;

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

U.S

First week of 2022 begins with a bang. Stocks backed away from record highs at the start of the week as longer-term bond yields increased. Expectations for higher interest rates took a particular toll on growth stocks and the technology-heavy Nasdaq Composite—which suffered its biggest weekly decline in nearly a year—by increasing the implied discount on future earnings. Refer to major indexes’ weekly performance tables below.Key highlights for the week/outlook:

1.    Fed minutes suggest hawkish turn. U.S. 10-year Treasury yields increase to pandemic high of 1.8%. The Fed minutes revealed that policymakers had discussed faster and more aggressive rate hikes, with the first quarter-point hike in the official short-term rate coming as soon March. 

2.    The week’s omicron news seemed to have a mixed impact on markets. New lockdowns in Hong Kong, and U.S. case numbers set new records. Investors seemed reassured that hospitalizations, though rising, were apparently decoupling from reported cases and the number of deaths remained roughly stable. 

3.    Jobs data offer mixed signals as released on Friday. Monthly payrolls reports showed 199k jobs added, only about half of consensus expectations. On the other hand, unemployment rate fell to 3.9%, lower than the 4.2% expected.

SPX sectors in play

Among the 11 SPX major sectors, Technology(XLk) and health care(XLV) shares were particularly weak, while energy(XLE) shares outperformed as domestic oil prices pushed back toward USD 80 per barrel. Financials(XLF) were also strong. This rotation from growth to value stocks has been driven primarily by a sharp rise in yields. Refer to below sector indexes weekly performance table.

Technically, all three major indexes uptrend was well intact.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

The Shanghai Composite Index (SSE weekly chart) shed 1.7% amid ongoing turmoil in the property sector and the U.S. Federal Reserve’s hawkish tilt. The Caixin Manufacturing PMI rose to a higher-than-expected 50.9 in December, up from 49.9 in November.

Further trouble in property sector.  China’s cash-strapped property developers, which are grappling with an unprecedented liquidity squeeze due to a housing slump and high debt levels, continued to make headlines.

In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) rebounded 0.41% this week, revised from its selloff earlier in the week, helped by a rebound in tech and property shares. The policy research office of the National Development and Reform Commission said in the official People’s Daily that China should pay more attention to stabilising growth.

Singapore

STI index(STI weeklychart) closed with strong start in first week of 2022, it’s the best outperformed index with 2.61% gains. Banks and financials lifted up the index. In coming weeks, the rapidly increased Omicron cases locally might affect market sentiment.

Year 2021 Wrap-Up: Santa Claus Rally Lifted the SPX Index to Record Highs

Weekly Wrap Content for the week of Dec 31:

1. Week 52 major indexes performance;

2. Week 52 US sector indexes performance;

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

4. Major indexes performance for the year 2021

U.S

Last week to wrap up the year 2021, all three major equity indexes recorded gains for the week, as a “Santa Claus rally” lifted the S&P 500 Index to record highs. The technology-heavy Nasdaq Composite lagged and finished flat. For SPX, 2021 was the best year of a three-year stretch of consecutive double-digit gains, raising the average annual return since 2019 to 26%.

Among major indexes, the best performer in 2021 is SPX with 27% gains, on the other hand, the worst performer is .HSI index with 14% losses. Singapore market recorded 10% strong gains, one of the best stock market in Asia. Refer to major indexes’ yearly and weekly performance tables below.

Key highlights for the year 2021 and 2022 outlook:

1.    U.S GDP growth in 2021 was the strongest since 1984, estimated to be 5.6% annualised. U.S stocks was the 6^th-best year since 1990, with SPX recorded 27% gains.

 2.  Looking forward, it’s expected 2022 should be positive but with more muted gains.

SPX sectors in play

Among the 11 SPX major sectors, the smaller sectors Energy(XLE) and Real Estate(XLRE) were among the top and 2^nd performers with 46% and 42% gains this year, Technology(XLK) recorded 34% gains in the 3^rd place. While the typically defensive utilities(XLU), and consumer staples(XLP) segments lagged. Refer to below sector indexes weekly performance table, ranked by yearly performance.

Technically, all three major indexes uptrend was well intact.

DJI monthly chart

SPX monthly chart

Nasdaq monthly chart

China/HK

The Shanghai Composite Index (SSE monthly chart) recorded 5% gains in 2021. In regulatory news, the country’s securities industry watchdog China Securities Regulatory Commission (CSRC) published draft rules that would require Chinese companies seeking initial public offerings (IPOs) and additional share sales overseas to register with the CSRC.

In Hong Kong, the benchmark Hang Seng Index retreated 14%—its worst performance in a decade—and the Hang Seng China Enterprise Index lost 23% in 2021. During the week, the chairman of China's securities regulator said the country will stabilize and reform its capital markets next year. Hang Kong(.HSI monthly chart) Hang Seng Index recorded 2^nd week rebound consecutively.

Singapore

STI index(STI monthly chart) closed with strong return of nearly 10% in 2021, a very good year.

Singapore GDP was -5.4% last year 2020 severely hit by COVID-19 outbreak and it turned around very quickly this year in line with other major economies, GDP growth expected to be around 7% this year and 3-5% next year as per official forecast. From this perspective, Singapore stock market expected to continue do well nest year but with moderate gains. Sectors such as banking(DBS, OCBC, UOB) will benefit from rising interest rates and tourism related stocks which hit hard by Covid expected to rebound along with Covid recedes.