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.