Stocks Remain Volatile as Focus Turns to Earnings

 Weekly Wrap Content for the week of Feb 4:

1. Week 5 major indexes performance;

2. Week 5 US sector indexes performance;

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

U.S

For the week ended Feb 4, stocks remained volatile but recorded overall gains for the 2^nd consecutive week. It was one of the busiest weeks of the 4Q earnings reporting season, with 112 companies in the S&P 500 Index scheduled to report results. These included several mega-cap names, which drove significant moves in the overall benchmarks. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Payroll report on Friday showed a surprising gain of 467k jobs in Jan-roughly three times consensus expectations—despite the impact of omicron. Payrolls jump pushes bond yields to new two-year highs to 1.93% on Friday. (Bond prices and yields move in opposite directions.) 

2.    Earnings of mega-cap drove market. Companies that missed earnings expectations, such as Meta (Facebook), have seen their stock prices punished, FB nosedived 26% after earnings and wiped a record USD 232 billion off its market cap on Thursday. However, it's an encouraging sign that the market has rallied on positive announcements from names like Apple, Alphabet (Google) and Amazon. 

3.    Rate hikes. Expectations have now shifted to as many as six rate hikes this year. Interest-rate futures curves are now implying a 1-in-3 chance that the Fed hikes rates by 50 basis points (0.50%) at the March meeting.

SPX sectors in play

Seven out of 11 SPX sectors closed positive this week. Energy(XLE) stocks continued its rally as crude oil prices pushed above USD 92 per barrel. Financials(XLF) also among top performing sector. Communication Services(XLC) lagged, dragged down by FB. Refer to below sector indexes weekly performance table.

Technically, DJI and SPX indexes closed above their 200DMA, but Nasdaq still below its 200dma despite this week’s redound.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s financial markets were closed during the week for the Lunar New Year. In economic news, the official manufacturing PMI declined to 50.1 from December’s 50.3 reading, and the nonmanufacturing gauge—which measures activity in the construction and services sectors—fell to 51.1 from 52.7. The 50 mark separates expansion from contraction. China A-share market will resume trading next week.

In Hong Kong, the benchmark Hang Seng Index(.HSI weekly chart) jumped 4.3% for the week, fully recovered its previous weekly loss which was its worst week since August. The index rallied to their best session on Friday after resuming trading from CNY holiday.

Singapore

STI index (STI weekly chart) closed at fresh 30-month record high for the week, resuming upward move after profit-taking in previous week. The index appears bullish and in a nice uptrend, immediate resistance at 3380 thereabouts.