Stocks Ended Mostly Higher as Bond Yields Jump

Weekly Wrap Content for the week of Mar 25:

1. Week 12 major indexes performance;

2. Week 12 US sector indexes performance;

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

U.S

For the week ended Mar 25, major indexes ended mostly higher, with the large-cap S&P 500 Index reaching its highest level since February 10 on Friday. Worries about an increasingly hawkish turn by the Federal Reserve seemed to weigh on equity sentiment early in the week, while prompting a sell-off in the bond market. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Fed rate-hiking. On Monday, Fed Chair Jerome Powell repeated in a speech to the National Association for Business Economics that the central bank could deliver rate increases of larger than 25 basis points (0.25 percentage points) at future meetings if policymakers deem it necessary to control inflation. 

2.    Developments in Russia's war against Ukraine also remained on investors' radar. Stocks seemed to gain some footing Thursday afternoon after an advisor to Ukrainian President voiced “cautious optimism” on ceasefire talks. 

3.    Initial jobless claims report provided further evidence of the strength in the labor market with new claims falling to the lowest level since 1969. In addition, job openings are still exceptionally high, which is a good sign that businesses are expecting ongoing demand. Add to this the more than $2 trillion in accumulated household savings and we think consumer spending (70% of U.S. GDP) will be able to grow despite higher borrowing costs. 

4.    The S&P 500 was down as much as 13% this year before the recent rally has brough that back to 6%. The average return for the S&P 500 in the twelve calendar months following the last four initial Fed rate hikes ('94, '99, '04, '15) was 8.3%, as per data from FactSet.

SPX sectors in play

8 out of 11 SPX sectors closed positive this week. Information technology stocks (XLK) outperformed, helped by gains in Apple following news of analyst expectations for strong sales of the iPhone 13. A continued rise in many commodity prices boosted the energy(XLE) and materials sectors(XLB), while health care shares(XLV) underperformed, dragged lower in part by a decline in drug giant Pfizer. Refer to below sector indexes weekly performance table.

Technically, all the indexes have broken above its downtrend line drawn since its all-time high the previous week and stayed above for 2^nd week, SPX is trading above all major moving averages i.e 20/50 and 200 now, DJI and Nasdaq are above 20/50 dma but below their 200dma respectively.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese markets fell amid delisting fears for U.S.-listed Chinese companies arising from a simmering bilateral dispute over auditing standards. For the week, the Shanghai Composite Index (SSE weekly chart) shed 1.2%.

Concerns about the fate of dual-listed Chinese stocks continued to dampen sentiment. Chinese regulators instructed some of the country’s U.S.-listed companies to prepare audit documents for the 2021 financial year, Reuters reported, citing unnamed sources. The companies reportedly included China’s top search engine Baidu, e-commerce platforms Alibaba and JD.com, and social media company Weibo.

However, analysts noted that it remained unclear if the talks between regulators on both sides would materialize into anything concrete. In a statement, the Public Company Accounting Oversight Board added that it “remains unclear” whether China would permit U.S. regulators to review the audits of U.S.-listed Chinese companies.

Reports of a worsening coronavirus outbreak across the mainland also depressed risk appetite. In the financial hub of Shanghai, the number of COVID-19 infections surged more than 60% to a record on Friday even as authorities broadened restrictions.

Hong Kong is suffering one of the deadliest outbreaks since the pandemic began in 2020. Hang Seng index(.HSI weekly chart) fell this week, shares of JD.com tumbled following a US$1.1 billion fundraising by its logistics arm on Friday erasing gains accumulated during the week. Traders kept risk appetite in check pending more potential slip-up in Big Tech earnings. Technically, the Hang Seng Index, indicators appear still weak after strong rebound last week, traders are still waiting for some concrete actions from the government to stipulate the markets, or else possible to fall back to form 2^nd leg of low.

Singapore

STI index (STI weekly chart) continued its rebound for 3^rd week. As Singapore announced this week to reopen borders to all full vaccinated travellers on Apr 1. STI weekly uptrend very well intact, expected for further upside.