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.