U.S stocks Logged Strong Rebound

Weekly Wrap Content for the week of May 27:

1. Week 21 major indexes performance;

2. Week 21 US sector indexes performance;

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

U.S

For the week ended 27 May, the U.S stocks logged strong gains after seven consecutive weeks of declines, the longest losing streak since 2001. Selling exhaustion, positive retail earnings reports, and hints of Fed flexibility all helped the S&P 500 rebound from its lowest in more than a year. The S&P 500 has so far managed to defend the bear-market threshold (marked by a 20% decline from the peak). The Dow also finishing higher for the first time in nine weeks. Refer to major indexes’ weekly performance tables below.Key highlights for the week and outlook:

1.    Fed policy. The No. 1 concern for investors is that the Fed will increase rates too far, pushing the economy into a recession. The release of the minutes from the May Fed meeting provided some relief to the markets. Most officials judged that a couple more 0.5% rate hikes will be appropriate, but the expedited pace of tightening in June and July can allow the Fed to assess the effects of policy firming later this year, implying a pause or slowdown in the pace of rate hikes. 

2.    Inflation. The Fed's preferred measure of inflation slowed in April from March, and market-based inflation expectations have declined from their peak, fully reversing this year's spike. The five- and 10-year expectations have declined the most over the past month since the start of the pandemic. 

3.    Signs of softening economic. Flash U.S. PMI receded to 57.5 in May, down from 59.2 in April. Services PMI reading came in at 53.5, down from 55.6 in the preceding month.

SPX sectors in play

Every sector in the S&P 500 advanced, with Consumer Discretionary(XLY) and Energy(XLE) stocks performing especially well. The Health Care(XLV) sector lagged. This cross-sector strength appeared to reflect optimism that inflationary pressures could be peaking. Refer to below sector indexes weekly performance table.

Technically all the three indexes had strong rebound and closed at three-week high, with only one week rebound, it’s uncertain whether it’s the end of downtrend decline or just rebound before further downside.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets was down this week amid concerns over slowing growth exacerbated by the government’s zero-tolerance approach to the coronavirus. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly chart) eased 0.5%.

Shanghai gradually eases lockdown restrictions, but economic concerns persist. Worries about a prolonged slowdown grew more prominent after Premier Li Keqiang held a rare video call with thousands of government officials in which he reportedly warned of dire consequences for China’s economy if they didn’t take measures to reverse the slowdown, Bloomberg reported. Chinese officials are reportedly conflicted between the views of President Xi Jinping, who continues to emphasize the country’s zero-COVID policy, and Premier Li Keqiang, who last week called for a better balance between pandemic controls and economic growth.

Hang Seng index(.HSI weekly chart) had strong rebound on Friday as Alibaba, Baidu, and Tencent drove relief rally after stronger-than-expected earnings results, but the index still closed on a weak note this week. Technically, the .HSI index closed above its 20,000 level for 2^nd week but sentiment remains weak for now.

Singapore

STI index (STI weekly chart) eased this week, the index traded largely within its previous weekly trading range- sideways consolidation for 2^nd week. Technical cautiously bullish as the index closed just above its 200dma and 250dma.

S&P 500 Edges Near Bear Market

Weekly Wrap Content for the week of May 20:

1. Week 20 major indexes performance;

2. Week 20 US sector indexes performance;

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

U.S

For the week ended 20 May, U.S. stocks continued to face downward pressure, with Wednesday marking the biggest one-day decline in the S&P 500 since June 2020. Equity markets broadly are now down for the seventh week in a row, and the S&P 500 approached a technical bear market – or 20% pullback – but closed the week down about 18% year-to-date. Markets were especially rattled in the week by earnings reports from key retail giants like Walmart and Target. Both companies reported lower-than-expected operating margins, driven by higher input costs from areas like freight and fuel. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Fears of a recession and profit-margin pressures intensify, pushing market further down. At its low point on Friday, the S&P 500 Index was down roughly 20.9% from its January intraday high, exceeding the 20% threshold for a bear market and placing it back at levels last seen in February 2021. 

2.    Disappointing earnings and revenue results from several of the nation’s major retailers. Target(TGT) fell roughly 25% after earnings fell short of estimates by nearly a third. Results from Walmart(WMT), Lowe’s(LOW), and Home Depot (HD) also fell short of expectation. Costco(COST) and Kohl's corp(KSS) tumbled. Aside from the hit to profit margins, investors seemed to worry that major retailers would be forced to pass on more of their higher input costs to customers in coming months, keeping inflation elevated. 

3.    Fed Powell acknowledges “some pain” ahead if necessary to control inflation. On Wednesday, Fed Chair Jerome Powell told The Wall Street Journal that taming inflation was an “unconditional need” and that policymakers wouldn’t hesitate to raise rates as much as necessary, even if it meant “some pain [was] involved.” 

4.    Economic data offered mixed signals about whether a recession was imminent. Retail sales had risen more than expected in April (0.6% versus roughly 0.4%), however, housing starts and existing home sales came in lower than expected.

SPX sectors in play

Three out of 11 SPX sectors closed positive this week, Energy(XLE) was top gainer, Consumer Staples(XLP), Consumer Discretionary(XLY) and Technology(XLK) are among the losers. Refer to below sector indexes weekly performance table.

Technically still bearish for all the three indexes, Dow was on 8^th week losing streak, Nasdaq and SPX were on 7^th straight losing week.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets rose as the central bank cut interest rates to support the country’s flagging property sector even as disappointing economic data weighed on sentiment. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly chart) added 2%.

The People’s Bank of China (PBOC) cut the five-year loan prime rate (LPR), a reference for home mortgages, by an unexpectedly large 15 basis points to 4.45%. Banks use the five-year LPR to price mortgages, while most other loans are based on the one-year rate.) The reduction in the five-year LPR signals that China’s government is trying to bolster homebuying demand.

Hang Seng index(.HSI weekly chart) was posting its first weekly gain this month after China lowered a key interest rate, boosting the growth outlook. Technically, the .HSI index rebounded back above its 20,000 level.

Singapore

STI index (STI weeklychart) rebounded after its two-straight weekly down. Bulls eventually able to hold above 200dma after back and forth hovering around it for the whole week, as China markets sentiment seems approving. Technically cautiously bullish.

High Inflation and Fear of Recession Punish Stocks

Weekly Wrap Content for the week of May 13:

1. Week 19 major indexes performance;

2. Week 19 US sector indexes performance;

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

U.S

U.S. major indexes recorded another week ended 13 May, as investors appeared to grow increasingly skeptical that the Federal Reserve will be able to achieve a “soft landing” for the economy by raising rates enough to tame inflation without causing a recession.  

It marked the sixth consecutive weekly decline for both the S&P 500 Index and the Nasdaq Composite and the seventh for the Dow Jones Industrial Average—the longest stretch for the latter since 2001, according to The Wall Street Journal. At its low point on Thursday, the S&P 500 was down nearly 18% from its peak, well into correction territory but just above the -20% performance threshold that typically defines a bear market. The benchmarks pared some of their losses on Friday, helped by a rally in Tesla shares after CEO Elon Musk tweeted that his deal to buy Twitter—partly funded by sales of a portion of his considerable stake in the electric car maker—was “on hold.”  Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation moderates less than hoped in April. Headline CPI increased 8.3% in April down from 8.5% in March, but not as much as expected 8.1% yoy. 

2.    Global sentiment seemed to get some relief after Chinese officials suggested that COVID-related lockdowns—which have been a source of uneasiness—may be set to ease.

SPX sectors in play

Only one out of 11 SPX sectors closed positive this week, that is Consumer Staples(XLP). Consumer Discretionary(XLY), Financials(XLF) and Technology(XLK) are lagging. Refer to below sector indexes weekly performance table.

Technically still bearish for all the three indexes, despite recovery on last two trading session of the week. It appears a bullish hammer formed on the weekly chart but we need to wait and see one more weekly candle to confirm the bullish reversal, for all the three indexes.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets rallied as a fall in coronavirus cases and reassuring comments from the securities regulator lifted investor sentiment. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly chart) added 2.76%.

The China Securities Regulatory Commission aims to increase the participation of institutional investors in the country’s stock markets and expand the investible universe of the exchange link with Hong Kong, according to an interview carried on state media with Vice Chairman Wang Jianjun.

The yuan’s slump is an unwelcome development for issuers of dollar bonds, many of which are in the debt-laden property sector and struggling with slowing sales, weak prices, and refinancing pressures. The property sector’s liquidity crisis continued as Sunac China Holdings and Zhongliang Holdings became the latest developers to discuss debt solutions on their repayment obligations.

Hang Seng index(.HSI weekly chart) jumped late in the week, paring the loss for the week to 0.5% as authorities rule out lockdown in Beijing. Technically, the .HSI index appears still weak, closed just 100pts below 20,000 level.

Singapore

STI index (STI weekly chart) declined for 2^nd week in a row, slumped the most with 3% loss this week. Technically bearish, immediate support to watch 3128 coming week which is 8 Mar low.

Stocks Under Pressure Amid Increasing Recession Fear

Weekly Wrap Content for the week of May 6:

1. Week 18 major indexes performance;

2. Week 18 US sector indexes performance;

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

U.S

For the week of 6 May, U.S. major indexes endured a fifth consecutive week of losses as interest rate and inflation worries continued to weigh on sentiment, especially toward growth stocks. The losses briefly pushed the Dow Jones Industrial Average(DJI) into correction territory, down more than 10% from its recent highs, where it joined the S&P 500(SPX) index. The Nasdaq Composite(Nasdaq) and the small-cap Russell 2000 Index ended the week firmly in bear markets, down more than 25%.

Markets were especially volatile late in the week, the Dow posted a 900-point gain on Wednesday, followed by a 1000-point drop the next day. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Interest rates. The Fed raised rates by 50 basis points (0.50%) in this week’s FOMC meeting, the first hike larger than 0.25% in 22 years. It is committed to following through on aggressive policy tightening in the coming months to catch up with the inflation curve. Likely same 50-basis-point rate hikes in the next two meetings, along with an active approach to reduce the size of the Fed's balance sheet. The market is currently pricing in about a 2.5% increase in the fed funds rate this year. 

2.    The market is pricing in a recession. Risks are rising but not guaranteed yet as evidence that economy expansion still ongoing. The week’s jobs report showed Apr payroll increased 428k, extending the streak of monthly job growth above 400k to 12 consecutive months. The unemployment rate held steady at 3.6%, just a tick above the half-century low. 

3.    Amid a broad rise in Treasury rates, the 10-year U.S. Treasury note yield breached 3.00% for the first time since late 2018, climbing as high as 3.13% on Friday. The yield curve is now pricing in significant rate hikes from the Fed this year. To the extent the Fed does not have to significantly up its rate-hike plans beyond current expectations (which will require inflation to start to moderate soon), expected the interest rates will be only move moderately from here. 

SPX sectors in play

Five out of 11 SPX sectors closed positive this week. Energy(XLE) and Financials(XLF)  stocks continues to outperform within the S&P 500. While Technolgy(XLK) and Consumer Discretionary(XLY) lagged. Refer to below sector indexes weekly performance table.

Technically bearish for all the three indexes as they recorded 5th week down in a row. Click below text for indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets fell as Beijing showed no sign of relaxing its zero-tolerance approach to the coronavirus, raising worries about the economic cost of widespread lockdowns. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly chart) fell 1.5%, just closed above it key psychological level 3,000.

Many of Shanghai’s 25 million residents remain under varying degrees of lockdown even though the city started to ease restrictions as infections have declined. Meanwhile, Beijing announced mass testing and increased restrictions in response to a growing outbreak. In a sign of how the virus restrictions have hit domestic consumption, spending over China’s five-day Labor Day holiday plummeted 43% from a year earlier to CNY 64.7 billion, or roughly USD 9.8 billion.

In economic news, China’s service sector activity shrank in April at the second-steepest rate on record, according to the latest Caixin services Purchasing Managers’ Index (PMI). Tensions with the U.S. remained elevated as the U.S. Securities and Exchange Commission (SEC) added over 80 U.S.-listed Chinese companies to its list of entities facing possible delisting from U.S. exchanges.

In another sign of growing tensions with the West, China has ordered central government agencies and state-backed companies to replace foreign-branded personal computers with domestic alternatives in two years, Bloomberg reported. The overhaul marks one of Beijing’s most aggressive moves to date to reduce the country’s reliance on U.S. technology.

Hang Seng index(.HSI weekly chart) slumped the most with 5.16% loss for this week on inflation jitters while China hardens zero-Covid stance. Alibaba, JD.com led tech rout as Hang Seng Tech Index tumbled 10 per cent in this week. Technically, the .HSI index just closed inches above its key psychological level 20,000.

Singapore

STI index (STI weeklychart) soldoff on Friday, gave up and closed below 3300 level it had held well over past two weeks. Further downside expected in short term if it cant rebound and stay above 3300 coming week. Weekly chart uptrend still intact but last candle(weekly) appears ugly. Next immediate support to watch is at 3250.