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.