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.