Russia and Rate Worries Push Stocks Lower

 Weekly Wrap Content for the week of Feb 18:

1. Week 7 major indexes performance;

2. Week 7 US sector indexes performance;

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

U.S

For the week ended Feb 18, U.S. equities finished lower ahead of the long holiday weekend. All the three major indexes suffered their second consecutive week of declines as worries over a Russian invasion of Ukraine and high inflation weighed on sentiment. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Conflicting signals on whether Russian troops were preparing to cross the border with Ukraine appeared to whipsaw markets throughout the week. With the Russia denies any attack on Ukraine but the U.S said invasion was “imminent”. 

2.    The Fed minutes for January meeting were relatively benign, which provided some relief to markets. By Friday afternoon, futures markets were pricing in an almost 80% probability of only a quarter-point hike in March, according to CME Group data. The probability of a 50 basis point hike in rates has decreased due to Fed minutes being released.

SPX sectors in play

Only one out of 11 SPX sectors closed positive this week. The typically defensive Consumer Staples(XLP) sector outperformed, helped by gains in Walmart and Procter & Gamble. A steep decline in Meta Platforms (Facebook) weighed heavily on the Communication Services sector(XLC), while Energy( XLE) experienced profit-taking for the week, nonetheless it’s still by far the outperformer this year currently. Refer to below sector indexes weekly performance table.

Technically, all the three indexes dropped back to just above their recent low area, DJI immediate support at 34000 level; SPX immediate support at 4300 level and the weakest among the three Nasdaq immediate support at 13000 level.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese markets rose as supportive comments from government officials and lower-than-expected inflation data increased investors’ risk appetite. For the week, the Shanghai Composite Index(SSE weekly chart) added 0.8%.

In a State Council meeting, China’s Premier Li Keqiang reportedly pledged that Beijing would swiftly roll out a slew of measures to provide stronger support to the economy, parts of which are still suffering from the effects of the coronavirus pandemic. Separately, China’s top finance minister vowed to further cut corporate tax rates, strengthen targeted fiscal spending, and tighten fiscal discipline. Finally, the head of the People’s Bank of China (PBOC) said that the central bank would maintain supportive monetary policy this year.

In Hong Kong, the benchmark Hang Seng Index (.HSI weekly chart) slumped after 2-week rebound, dragged by the tech shares, after China’s regulators proposed measures that would require online food delivery platforms to reduce fees for restaurants. Food-delivery giant Meituan slumping 17.47% this week as the biggest loser on the Hang Seng.

Singapore

STI index (STI weeklychart) stalled this week, took a breather after two-week rally. Except three local banks, aviation and tourism, defensive industrials and palm oil related stocks outperformed.