S&P 500 falls to lowest close of 2022 as Amazon weighs

Weekly Wrap Content for the week of Apr 29:

1. Week 17 major indexes performance;

2. Week 17 US sector indexes performance;

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

U.S

For the week of 29 Apr, U.S. major indexes plummeted and closed the final session of April solidly lower. The equity markets came under pressure as an abundance of headwinds remained, most notably expectations of an aggressive Fed tightening cycle, lockdowns in China, persisting inflation concerns, rising interest rates, and the recent jump in the U.S. dollar. Earnings season plowed ahead and brought a round of somewhat disappointing results, headlined by a sharp loss from Amazon, strong quarterly results but cautious guidance from Dow member Apple, and lackluster guidance from Dow component Intel.

The S&P 500 Index moved further into correction territory, down roughly 14% from its recent peak, while the technology-heavy Nasdaq Composite and small-cap Russell 2000 Index fell further into bear markets, down roughly 24% from their highs. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    The economic calendar showed personal income and spending came in stronger than expected, and inflation pressures remained elevated with the Q1 Employment Cost Index rising more than expected. 

2.    This week was the busiest of the first-quarter earnings season, with more than one-third of the S&P 500 companies reporting results, including the mega-cap tech names. Alphabet (Google), Amazon, Apple, Meta (Facebook) and Microsoft together make up 21% of the S&P 500. Results were mixed, with signs that growth is slowing but also evidence that long-term trends, like digital transformation, remain alive and well. 

3.    Corporate guidance has so far provided some reassurance that S&P 500 earnings can still grow between 5% -10% this year, partly offsetting the headwind of declining valuations. 

4.    Q1 GDP contraction. The initial estimate for first-quarter economic growth showed an unexpected contraction, with U.S. real GDP (inflation-adjusted) declining 1.4%, down from a +6.9% growth in the previous quarter. This sharp deceleration was due to a drag from exports, a decline in inventory spending following a sizable increase in the prior quarter, and to a lesser extent a pullback in government spending. But consumer spending, which accounts for nearly 70% of the U.S. economy, continued to grow at a solid pace.

SPX sectors in play

All 11 SPX sectors closed underwater this week. Energy stocks outperformed within the S&P 500 after Russia announced that it was cutting off natural gas exports to Poland and Bulgaria. Amazon(AMZN) shares plunged 14% after the company surprised investors with its first quarterly loss since 2015, due in part to weaker online sales. AMZN dragging down Consumer Discretionary(XLY) sector which was the worst performer for the week. Refer to below sector indexes weekly performance table.

Technically bearish for all the three indexes as they all have breakdown from their recent consolidation and dropped decisively lower.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets ended lower amid reports that the country’s Politburo pledged to boost economic stimulus and called for the “healthy development” of the technology sector. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly chart)fell 1.3%, recouping earlier losses spurred by concerns about the government’s zero-tolerance approach to the coronavirus.

Concerns about the steep cost of China’s zero-tolerance policy regarding the coronavirus continued as the government stepped up containment measures and rolled out mass testing in Beijing and Hangzhou. Several manufacturers with China operations, including GE, South Korean chipmaker SK Hynix, and carmaker Mercedes Benz, warned of supply chain disruptions and an uncertain business outlook due to the restrictions.

Hang Seng index(.HSIweekly chart) added 2.2% for this week, recorded first week rebound after three-week down streak. A strong rebound on Friday recouped all its earlier losses in the Hang Seng index. Alibaba and Meituan fuelled Hong Kong’s best stock rally in a month as China prepares to end a crackdown on tech companies, potentially ending a multi-month, trillion-dollar slump.

Singapore

STI index (STI weeklychart) closed flat this week, appeared very resilient on its weekly chart, the index was the only index with positive YTD return of 7.5%, which is outstanding as compared to Nasdaq’s -21% and SPX’s -13% losses. Weekly chart uptrend is well intact, for now. Key resistance level 3466(year-high), and immediate support at recent low 3300 level.

Stocks Sell Off Hard Anticipating More Aggressive Rate Hikes

Weekly Wrap Content for the week of Apr 22:

1. Week 16 major indexes performance;

2. Week 16 US sector indexes performance;

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

U.S

For the week of 22 Apr, U.S. equities closed solidly lower, with the major indexes posting another week of losses. The S&P 500 registered a third-straight weekly decline with the markets remaining hamstrung by multiple major uncertainties and headwinds. Fedspeak continued to pour in and boost expectations of aggressive Fed measures on the near horizon, including a series of 50 bp hikes and the beginning of reducing its massive balance sheet. Meanwhile, the war in Ukraine escalated to keep global economic and inflation concerns palpable, while earnings season began to heat up. Shares of Netflix tumbled more than 35% during the week, as the company reported disappointing quarterly results that were headlined by a sequential decline in its global subscriber rolls. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Fed strikes hawkish tone. Fed Chair Jerome Powell said a 50-basis-point rate increase could be “on the table” for the May 3‒4 policy meeting and stated that “it is appropriate…to be moving a little more quickly.” While acknowledging the challenges of engineering a soft landing, Powell disputed fears that the Fed’s rate-hiking cycle would risk pushing the economy into recession, citing the historically strong labor market. James Bullard, president of the Federal Reserve Bank of St. Louis, indicated that a rate increase of as much as 75 basis points (0.75 percentage points) could be up for discussion. 

2.    April business activity mixed with services slowing and manufacturing accelerating. The preliminary S&P Global U.S. Manufacturing PMI Index for April unexpectedly rose to 59.7 from March's unrevised 58.8 figure, and versus the Bloomberg consensus estimate of a decrease to 58.0. The preliminary S&P Global U.S. Services PMI Index showed growth for the key U.S. sector in April surprisingly slowed to 54.7, compared to expectations to remain at March's 58.0 figure.

SPX sectors in play

Two out of 11 SPX sectors closed positive this week. Netflix Inc. (#NFLX) falling sharply after its unexpected subscriber decline and softer-than-expected guidance to weigh on the Communications Services(XLC) sector, which was the worst performer on the week. The sectors have solid performance so far this year also started cracking this week, such as Energy(XLE) and Healthcare(XLV). Consumer Staples(XLP) and Real Estate(XLRE) closed with gains. Refer to below sector indexes weekly performance table.

Technically bearish for all the three indexes as they have breakdown from their recent consolidation area and dropped decisively lower. Nasdaq Composite Index among the weakest and expected to re-test its 12500 level for 3^rd time soon.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets slid as investors worried about the economic fallout from coronavirus lockdowns after officials said tough restrictions would remain in place. The CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, fell 4.2% this week in its worst five-day performance since mid-March, according to Bloomberg. The Shanghai Composite Index (SSE weekly chart) dropped 3.87%.  

Foreign investors sold a net USD 1.01 billion worth of Chinese stocks so far in April via the Hong Kong Stock Connect program, Reuters reported. The latest outflow comes after foreigners sold roughly USD 7.1 billion in March, which was the largest outflow in nearly two years. The outflows have stoked official concern, with the China Securities Regulatory Commission reportedly calling upon the country’s National Social Security Fund, banks, and insurers to boost their equity investments, Bloomberg reported.

China’s economy grew at a stronger-than-expected 4.8% pace in the year’s first quarter from a year ago, up from 4.0% in last year’s fourth quarter. On a quarter-on-quarter basis, the economy expanded 1.3% in the first three months of the year, slowing from the previous quarter’s 1.6% increase. The IMF cut China’s 2022 growth forecast to 4.4% from 4.8% in its latest outlook, the second downgrade for the country in three months.

Hang Seng index(.HSIweekly chart) lost 4.09% for this week, recorded its 3^rd week consecutive retreat.  

Singapore

STI index (STI weeklychart) was up 0.76% for this week, was the only one in my watchlist indexes refer to the above table. The index rebounded 1^st week after two-week down. Weekly chart uptrend is well intact, for now. Key resistance level 3466(year-high), and immediate support at recent low 3300 level.

Stocks Lower as Earning Season Kicks Off

Weekly Wrap Content for the week of Apr 15:

1. Week 15 major indexes performance;

2. Week 15 US sector indexes performance;

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

U.S

Major indexes ended down over a holiday-shortened week. The market was closed Friday in observance of the Good Friday holiday. Q1 SPX earning season officially kicked off this week, with big banks in focus. JP Morgan(JPM), Morgan Stanley(MS) and Goldman Sachs(GS) already released their results, and overall, the message seemed to be one of cautious optimism. Anticipation of a sharp deceleration in earnings growth appeared to be one factor weighing on sentiment. Forecasts for S&P earnings growth for the year remain anchored around 9.5% for 2022, still solid as compared history average but poised to moderate from last year's stellar 45% rate. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Inflation data in focus, investors digested two important inflation readings for the month of March – the U.S. consumer price index (CPI) and the producer price index (PPI). Both indicators remain at multidecade highs. The CPI figure came in at 8.5% year-over-year, in line with expectations and at a 40-year high. Meanwhile, PPI came in at 11.2% year-over-year, the highest on record. 

2.    Central banks are on the move globally. Some major central banks are on the similar inflation-fighting agenda as the Fed. Bank of Canada(BoC) this week raised rates by 0.5%, New Zealand and Korea both raised rates by 0.25%. However, the European Central Bank(ECB) decided to keep its rates on hold at 0% given uncertainty posed from the geopolitical crisis.

SPX sectors in play

Four out of 11 SPX sectors closed positive this week. Value stocks continued to outperform their growth counterparts, but small-caps regained ground lost the previous the week on large-caps. Technology(XLK), Communication Services(XLC) and Financials(XLF) lagged, dragged lower by JPMorgan Chase after the banking giant missed Wall Street’s estimates. Materials(XLB) and Energy(XLE) shares outperformed. Refer to below sector indexes weekly performance table.

Technically, all the three indexes closed under water but DJI index appeared more resilient(most are traditional value giants companies) while the technology dominant Nasdaq and SPX underperformed DJI by over 1% this week.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets retreated for the week as a surging coronavirus outbreak in Shanghai fueled concerns about supply chain disruptions. The broad, capitalization-weighted Shanghai Composite Index (SSE weekly chart) eased 1.25% this week.

Supply chain paralysis gripped parts of China’s manufacturing sector as a growing number of Chinese cities reimposed restrictions to quash the virus. However, Shanghai to resume some production after 16-day lockdown, even as it reports more than 24,000 new cases on Sunday. Major automobile, semiconductor and biomedicine companies are to submit detailed plans about guarding against the spread of Covid-19 for the local health authorities to review.

In economic readings, China’s consumer price index accelerated in March, while the producer price index declined from February’s reading but still exceeded forecasts. China’s exports rose a better-than-expected 14.7% in March from a year ago, but imports unexpectedly declined, falling short of forecasts for growth and marking the first drop since August 2020.

Hang Seng index(.HSI weekly chart) closed lower in the shortened holiday week, lost 1.62% recorded its 2^nd week retreated.  

Singapore

STI index (STI weeklychart) was down 1.4% in the holiday-shortened week, 2^nd week loss in a row. The index appears in profit-taking mode after hitting key resistance level 3466(year-high) two weeks ago. STI weekly uptrend still intact, next major support at 3250 level.

Stocks Drop as Investors Brace for Rate Hikes

Weekly Wrap Content for the week of Apr 8:

1. Week 14 major indexes performance;

2. Week 14 US sector indexes performance;

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

U.S

For the week ended Apr 8, major indexes finished lower for the week, with small-caps and growth stocks lagging considerably. Volumes were sparse for much of the week, as investors awaited the start of first-quarter earnings reporting season. Twitter shares jumped over 27.0% on Monday, however, following news that Elon Musk had acquired a 9.2% stake in the social media firm. Fed minutes confirm an aggressive tightening plan ahead and the situation in Ukraine continued to loom large over sentiment. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Interest rate hikes. Fed’s minutes from the mid-March policy meeting revealed that policymakers were prepared to reduce the central bank’s balance sheet by USD 95 billion per month, more than the consensus expectation of around USD 80 billion. The minutes also showed that officials were prepared to raise rates by 50 basis points (0.50%) at their upcoming May meeting. By the end of week, futures markets were predicting that the most likely scenario was for the federal funds target range to hit 2.50% to 2.75% by the end of the year—well above its current range of 0.25% to 0.50%. 

2.    Weekly jobless claims fell much more than expected to 166k, hit lowest level since 1968. Arguably suggested that the economy was proving resilient in the face of inflation and the war in Ukraine.

SPX sectors in play

Five out of 11 SPX sectors closed positive this week. The typically defensive consumer staples(XLP) and health care(XLV) sectors recording solid gains, while information technology(XLK), communication services(XLC), and consumer discretionary(XLY) shares registered steep losses. Refer to below sector indexes weekly performance table.

Technically, all the three indexes closed under water but DJI index appeared more resilient while the technology dominant Nasdaq dropped the most. DJI and SPX indexes are still above their 20/50 moving averages, while Nasdaq went under both Mas.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets down for the week, as a coronavirus lockdown in Shanghai and expectations for aggressive monetary tightening by the U.S. Federal Reserve curbed risk appetite. The broad, capitalization-weighted Shanghai Composite Index declined 0.94%, and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, fell 1.08%.

Shanghai has been under a citywide, two-stage lockdown that began on March 28 in an effort to stop the virus’s spread. With 23 Chinese cities currently under total or partial lockdown, Nomura has estimated that 193 million people are affected in areas that account for 13.5% of China’s economy.

In economic news, the Caixin Services Purchasing Managers’ Index, a private survey focused on smaller businesses, sank to 42 in March from 50.2 in February, its lowest level since the pandemic started, reflecting the latest outbreak’s toll on consumer demand. In response to recent weak economic data, expectations are mounting that the People’s Bank of China will reduce the reserve requirement ratio in near term.

Hang Seng index closed lower this week after rebounded previous week as the spectre of extended lockdown in Shanghai unnerves market with hit to earnings, economy. China’s market regulators proposed revising confidentiality rules involving offshore listings, a move that could end the country’s long-running dispute with the U.S. over audit inspections for dual-listed companies. This is a great relief especially for China tech giants such as Alibaba, JD.com, Baidu etc.

SSE weekly chart

.HSI weekly chart

Singapore

STI index was down 1.05% after its four-week consecutive up. As shared in my previous weekly post, the index appears losing steam and risk in profit-taking facing key resistance level 3466(year-high), though STI weekly uptrend very well intact, for now.

STI weekly chart

Indexes Close Out Positive Month but Down Quarter

Weekly Wrap Content for the week of Apr 1:

1. Week 13 major indexes performance;

2. Week 13 US sector indexes performance;

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

U.S

For the week ended Apr 1, major indexes ended mixed for the week, with the S&P 500 Index closing out its best month since December but its worst quarter since early 2020 with about 5% down. Nonetheless, over the last few weeks U.S. markets have rebounded nearly 10% from their lows, climbing several walls of worry, including higher inflationary pressures, a potentially more aggressive Fed, and the ongoing crisis in Russia/Ukraine. Refer to major indexes’ weekly performance tables below.

Key highlights for the week/outlook:

1.    Ukraine dominates sentiment. Stock prices fluctuated over the week in apparent response to the evolving situation in the war in Ukraine. 

2.    The U.S. consumer remains healthy. Friday's jobs report underscored this as well, with the unemployment rate falling to 3.6% -- a post-pandemic low – and average hourly earnings increasing to 5.6% year-over-year. More broadly, U.S. households overall are entering the year with over $2.5 trillion more in savings than before the pandemic began, which offers some cushion in the face of rising borrowing costs in the year ahead.   

3.    Corporate balance sheets and earnings growth have been resilient. Expectations for S&P 500 earnings growth are now at 9.1%, up from 7.0% on Dec. 31, in line with average historical growth rates. 

4.    The yield curve inversion is a yellow flag, but still just one datapoint. A key part of the U.S. Treasury yield curve, the difference between 10-year and two-year yields, has now inverted – on two occasions – for the first time since 2019. Thus far, this signal is not confirmed by another yield curve, the 10-year and three-month yields, which is often a preferred indicator and remains positive.

SPX sectors in play

Seven out of 11 SPX sectors closed positive this week. Cyclically sensitive stocks underperformed as investors girded for a slowdown in growth, with the financial services(XLF) and industrials sectors(XLI) among the losers. Higher interest rate expectations took a toll on the information technology(XLK) sector, while the typically defensive consumer staples(XLP) and utilities(XLU) sectors outperformed. Refer to below sector indexes weekly performance table.

Technically, all the three indexes appear have losing steam after two-week up in a row, expected the index to take a breather in short term, nonetheless the indexes are remained above key downtrend line. I’m cautiously bullish for now.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese markets gained for the week, as investors anticipated that Beijing would step in to support the country’s economy and markets. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly chart) rose 2.2%. SSE index rebounded for the 1^st week after 5-week down streak.

Delisting concerns continued to pressure technology stocks, as investors worried about the risk of dual-listed Chinese firms getting kicked off U.S. exchanges. The U.S. Securities and Exchange Commission added five U.S.-listed Chinese internet companies to its growing list of companies facing possible delisting due to China’s refusal to allow U.S. regulators to inspect their audits, including Baidu, and iQiyi.

In economic news, China’s purchasing managers’ indexes for manufacturing and services lagged forecasts and fell into contraction in March as outbreaks of the omicron variant of the coronavirus across the country led to lockdowns and disrupted industrial production. Shanghai saw a renewed COVID-19 outbreak with more than 32,000 cases reported in the past month, the biggest spread of infection in China since it first appeared in Wuhan.

Hang Seng index(.HSIweekly chart) closed higher for the week but the index was down 3^rd quarter in a row. Tech stocks extended a quarterly loss as monetary policy tightening. Technically, the .HSI index expected to continue its bottom-consolidation mode while waiting for positive sentiments build up.

Singapore

STI index (STI weeklychart) edged up for the week, its 4^th week consecutive up. It was a roller-coaster but the local index ended a strong Q1 with 9.1% gain. STI weekly uptrend very well intact, it’s trading around its year high 3466, expected to take a breather in the short run.