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.