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.