S&P 500 Rallied Out of Bear Market Territory

Weekly Wrap Content for the week of Jun 24:

1. Week 25 major indexes performance;

2. Week 25 US sector indexes performance;

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

U.S

For the week ended 24 Jun, U.S stocks rebounded sharply higher for the first week after three-week consecutive decline. Signs that inflation might be moderating as growth cooled helped stocks rally sharply over the holiday-shortened week, lifting the S&P 500 Index out of bear market territory. A text book example as bad news for the economy interpreted as good news for stocks. Nearly every sector in the index recorded strong gains. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    The week’s economic data offered several signals that the Federal Reserve’s forceful turn toward monetary tightening was having the intended effect of slowing the economy and moderating inflation. Existing home sales reported fell to their lowest level in May since June 2020; S&P Global’s index of June manufacturing activity came in well below forecasts (52.4 versus roughly 56), while its services gauge also missed estimates and hit its lowest level since January. 

2.    The University of Michigan’s final reading of June consumer sentiment was revised down to 50.0, its lowest level in records dating back over four decades. 

3.    Futures markets began pricing a slightly higher chance of only a 50-basis-point (bp, or 0.50 percentage point) increase in the federal funds target rate at the next policy meeting—although another 75 bp increase still seemed the most likely.

SPX sectors in play

10 out of 11 sectors in the S&P 500 recorded strong gains. Energy(XLE) stocks were the notable exception, as oil continued to back off from its recent highs over most of the week. Consumer Discretionary(XLY) and Technology(XLK) stocks were among top gainers. Refer to below sector indexes weekly performance table.

Technically all the three indexes rallied from 5.4% to 7.5% this week, DJI and SPX each recovered its full losses from previous week, Nasdaq gained even more after the full recovery. But all three indexes are still in downtrend, and it’s remain to be seen whether it’s just a bear market rebound or the decline is over.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets advanced on stimulus hopes after President Xi Jinping pledged to roll out more measures to support the economy and minimize the impact of COVID-19. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) added 1.0% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, rose 1.97%.

At a virtual BRICS (Brazil, Russia, India, China, and South Africa) Business Forum, President Xi stated that China will “strengthen macro-policy adjustment and adopt more effective measures to strive to meet the social and economic development targets for 2022 and minimize the impacts of COVID-19.” Separately, China’s Finance Minister Liu Kun said that Beijing will accelerate fiscal spending and the sale of special local government bonds.

Hang Seng index(.HSI weekly chart) closed up 3.1% this week, technical indicators appear bullish. Expected the .HSI index to continue its rebound as long it can hold above 21,000 level.

Singapore

STI index (STI weekly chart) edged slightly higher after previous two-week selloff streak, expected the index to stabilise a bit coming week(s), immediate technical support to watch at around 3050 level.

Fears of A “Hard Landing” Send Stocks Sharply Lower

Weekly Wrap Content for the week of Jun 17:

1. Week 24 major indexes performance;

2. Week 24 US sector indexes performance;

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

U.S

For the week ended 17 Jun, U.S stocks finished sharply lower for a 2^nd consecutive week in a knee-jerk reaction to the Federal Reserve’s most aggressive rate hike since 1994, which raised recession fears. The S&P 500 Index recorded its worst weekly decline since March 2020 and entered a bear market, ending the week nearly 24% below its January peak. Meanwhile, the percentage of S&P 500 members that were trading above their 50-day moving average sank below 5% during the week, the lowest level since pandemic fears battered shares more than two years ago. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    The Fed’s policy committee announced on Wednesday afternoon that it was raising the federal funds rate by 75 bps to a target range of 1.50% to 1.75%, its highest level since early 2020, although one member dissented. Stocks rallied as investors appeared to welcome what Fed Chair Jerome Powell termed the “strong move” in his post-meeting press conference, as well as his expressed willingness to raise rates in another 75 bps increment if necessary—although he does not expect rate increases of this magnitude to be “common.” At the same time, Powell insisted that “there's no sign of a broader slowdown that I can see in the economy.” 

2.    Housing market sees impact of rising mortgage rates. Several reports indicated that the housing sector was already feeling the impact of Fed tightening and the surge in mortgage rates: Building permits fell 7% in May to their lowest level since last September, while housing starts sank 14.4%, the biggest drop since the onset of the pandemic. Weekly jobless claims also came in higher than expected (229,000 versus roughly 210,000). 

3.    Retail sales data, reported Wednesday, further stoked recession fears. Overall sales fell 0.3% in May, dragged lower by a sharp decline in auto purchases, which partly reflected higher rates on car loans. 

4.    Treasuries were mixed, with the yield curve flattening some, while the U.S. dollar resumed its rally.

SPX sectors in play

All 11 sectors in the S&P 500 closed lower for 2^nd consecutive week. Crude oil prices were sharply lower and gold traded to the downside. Energy( XLE) was the worst performer with more than 17% loss. Refer to below sector indexes weekly performance table.

Technically all the three indexes dropped from 4.8% to 5.8% this week, have broken down their four-week technical support and went down further, technical indicators appear very bearish.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets advanced on hopes that a pickup in fixed asset investments would put the country’s economy back on track. The broad, capitalization-weighted Shanghai Composite Index(SSE Weekly Chart) added 1.0% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, rose 1.4% to its highest level in three months, according to Reuters.

China’s state planner approved 10 fixed asset investments worth CNY 121 billion (USD 18.1 billion) in May, a more than sixfold jump from April. Sentiment also received a boost after data showed surprising growth in industrial production in May and from hopes of increased policy support following weak housing market data. News of relatively relaxed coronavirus curbs in Beijing also lifted investors’ optimism. The city is returning to regular testing and targeted lockdowns rather than mass testing and lockdowns of entire districts.

Hang Seng index(.HSI weekly chart) was down 3.4%, affected by the Fed rates hike as HK markets are more influenced by international investors. Technically, Hang Seng Index managed to closed just above 21,000 level which is a positive sign, expected the index to continue rebound in coming week.

Singapore

STI index (STI weekly chart) extended its previous week’s losses, was down 83.64pts or 2.6% this week. Technically, STI has broken down its technical support level for past five-week, technical indicators turned bearish and expected further downside move, with immediate support to watch at around 3050 level.

Hotter-Than-Expected Inflation Drags Stocks Down

Weekly Wrap Content for the week of Jun 10:

1. Week 23 major indexes performance;

2. Week 23 US sector indexes performance;

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

U.S

For the week ended 10 Jun, U.S stocks finished with steep losses despite some early-week strength. This week the biggest market-moving economic data arrived on Friday, with the release of the U.S. consumer price index (CPI) inflation reading for the month of May. The inflation data broadly came in hotter than expectations, with the headline figure coming in at 8.6% year-over-year, above expectations of 8.2%, while core CPI (excluding food and energy) came in at 6.0%, slightly above the 5.9% forecast.

Losses in the tech-heavy Nasdaq Composite were worse than in the broad market as higher interest rates reduced the appeal of companies that may not generate meaningful earnings until well into the future. Value stocks held up better than growth stocks. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    The key driver of headline inflation continues to be rising global food and energy prices. With uncertainty in the Ukraine war (which continues to be difficult to handicap) and China's reopening driving demand, commodity prices may remain stubbornly elevated over the next several months. 

2.    The Fed has already endorsed 0.50% rate hikes for the June and July meetings, and today's hot inflation reading increases the odds of a September 0.50% rate hike. Markets are now pricing in a 62% probability of a 0.50% rate hike and a 33% chance that the Fed moves even more aggressively, with a 0.75% rate hike.

SPX sectors in play

All 11 sectors in the S&P 500 closed lower, Technology(XLK) and Financials(XLF) dropped the most. Refer to below sector indexes weekly performance table.

Technically all the three indexes dropped from 4.6% to 5.6% this week, given back all its recent rebound, back to square one and closed at their four-week low respectively.

Technical indicators appear bearish, further downside possible.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets rallied amid hopes for looser monetary policy and signs that Beijing was easing its years long crackdown on the technology sector. The broad, capitalization-weighted Shanghai Composite Index (SSE weekly chart) rose 2.8% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, climbed about 3.7% in its biggest weekly gain since February 2021, according to Reuters.

China’s regulators are ending their probe into DiDi Global and will restore the ride-hailing giant’s mobile apps back on domestic app stores, The Wall Street Journal reported. Separately, media outlets reported that authorities are in talks about reviving the initial public offering for Ant Group, which was pulled in December 2020 after the fintech company’s founder Jack Ma made critical comments about China’s financial regulators. Both developments signaled that Beijing is dialing back its regulatory clampdown on the tech sector that started in late 2020. In a further sign of policy relaxation, China’s gaming regulator granted publishing licenses to 60 online games, the biggest approval of titles for computers and smartphones since July 2021.

Hang Seng index(.HSI weekly chart) was the top gainer in my indexes weekly performance table above, recorded 3.4%, thanks to a rally in Chinese giant technology stocks. The Hang Seng Tech index rallied 9.7% in the week.  

Singapore

STI index (STI weekly chart) STI index lost 50.24pts or 1.6% for this week. Technically, STI dropped towards its lower sideway range over past two weeks, closed below both of 200dma and 250dma(3224-3207) level. Immediate support to watch at five-week low 3165 level.

Local stocks sentiment turns to a little bit sour on Wednesday as the MAS survey shows Singapore’s GDP growth in 2022 was cut to 3.8% from the 4.0% previously estimated in March. Inflation forecasts for this year also raised to 5%, up from 3.6% in the previous survey. It was a straight 3-day down streak started from Wednesday, led its way south by the three local banks. STI index lost about 50 points or 1.5% in 3 days, as comparison, the index was trading in a narrow 20points the previous whole week.

The STI index has been trading largely within its sideway consolidation range from 3250 to 3165 area over the last 4.5 weeks. This week, the local index lost 50 points or 1.6%(as at 2pm), dropping closer to its 5-week range bottom 3165. Going forward, to watch immediate technical support level 3165, which is its 5-week trading bottom, if the level breached, a further downside expected, with major support at around 3050.

Stocks Pull Back From Previous Week’s Rally

Weekly Wrap Content for the week of Jun 3:

1. Week 22 major indexes performance;

2. Week 22 US sector indexes performance;

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

U.S

For the week ended 3 Jun, U.S stocks surrendered a portion of the previous week’s strong gains as investors continued to question whether the Federal Reserve will be able to rein in inflation without causing a recession. Much of the week’s data suggested continued solid economic expansion, at least for now. Inflation may have peaked, but Fed’s path remains uncertain. Some speculation grew that the Fed might pause rate hikes at its September meeting to gauge their impact to date on the economy. Refer to major indexes’ weekly performance table below.

Key highlights for the week and outlook:

1.    Healthy job growth supports a reasonably favorable outlook for the consumer. The economy added 390k jobs in May, exceeding consensus expectations of 322k. Year-to-date monthly payroll gains are running at more than double the pace of 2018 – the previous period when the market grew worried that Fed rate hikes were ushering in an economic downturn. 

2.    Unemployment rate not heralding a coming recession. The unemployment rate held steady at 3.6% in May, the best rate since the pandemic and just a shade above a half-century low. Low unemployment is obviously helpful to consumer spending. 

3.    Also in May employment report, average hourly earnings were up 5.2% over the prior year. Wage growth ran between 2%-2.5% for most of the prior economic expansion (2009-2020), peaking at 3.5% in 2019, so current wage gains above 5% provide a favorable tailwind for consumers. 

4.    The stock market reacted negatively on Friday to the employment data, not because it was bad news for the economy, but instead because it was sufficiently positive to keep the Fed in an aggressive stance toward coming rate hikes.

SPX sectors in play

Two of the 11 sectors in the S&P 500 advanced, Energy(XLE) and Industrials(XLI) shares outperformed, helped by a rise in Boeing. Consumer discretionary(XLY) shares also proved resilient, boosted by gains in Amazon.com. Refer to below sector indexes weekly performance table.

Technically all the three indexes dropped around 1% after a strong rally previous week. Volume is lightest in 7 weeks in the holiday-shortened week. SPX immediate technical support at 4074; Nasdaq gap support 11800-11850; DJI 32600.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets rallied in a holiday-shortened week after Beijing unveiled a raft of support measures to cushion an economic slowdown triggered by the country’s zero-tolerance approach to the coronavirus. For the week ended Thursday, the broad, capitalization-weighted Shanghai Composite Index(SSE weekly chart) rose roughly 2.1%, and the blue-chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, climbed 2.2%. China’s stock and bond markets were closed Friday for the Dragon Boat Festival.

China’s government unveiled more details of the stimulus programs it announced the previous week, with 33 measures covering fiscal, financial, investment, and industrial policies. Demand for Chinese bonds—already weakened due to rising U.S. Treasury yields—received a further setback amid reports that the government plans to accelerate the issuance of local government special bonds for funding various projects.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to a stronger-than-expected 48.1 in May from 46.0 in April, when it hit its lowest level in 26 months. Headlines regarding China’s debt-laden property developers turned slightly positive. A private survey showed that new home prices rose slightly in May from April.

Hang Seng index(.HSI weekly chart) recorded weekly gain while it also closed for public holiday on Friday. The index rebounded to close above both its 20 and 50dma for the 1^st time since Feb 16—a positive indicator that the index turning into technical bullish now.

Singapore

STI index (STI weekly chart) closed flattish this week, the index has been in sideways consolidation into 3^rd week. Technically cautiously bullish as the index closed just above its 200dma.