U.S. Technical Recession, Stocks Rebounded

** Contents/Data including information from various public market reports

Weekly Wrap Content for the week of Jul 29:

1. Week 30 major indexes performance;

2. Week 30 US sector indexes performance;

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

U.S

For the week ended 29 Jul, U.S three major indexes posted solid gains despite another outsized 75-basis-point rate hike from the Federal Reserve (Fed) and news that the economy contracted at a 0.9% annual rate in the second quarter, marking the best monthly gain for the S&P 500 since August of 2020. The advance came amid upbeat earnings results from some key heavyweight companies, headlined by stronger-than-expected results from Dow member Apple and Amazon. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Rates hike. Jul Fed meeting in the week raised rates by 75 basis points(0.75%),bringing the benchmark fed funds rate to about 2.5%. Fed funds rate is now close to the Fed's estimate of a neutral rate, indicating an official end of the post-pandemic easy money policy. Fed referenced rates range of 3.0%-3.5% by the end of the year. Markets currently anticipate a 50-basis-point hike in September, followed by two 25-basis-point hikes in November and December. 

2.    GDP. Q2 GDP is at -0.9% QoQ. This was the second quarter in a row of a negative GDP reading in the U.S., which is largely considered a technical definition of a recession. 

3.    Q2 Earnings. About 50% of the companies in the S&P 500 reported earnings during the week. investors focused on quarterly numbers from technology giants such as Amazon.com, Apple, and Google parent Alphabet. Amazon.com and Alphabet jumped on Wednesday after posting better-than-feared earnings results after the market closed on Tuesday.

SPX sectors in play

All 11 sectors in the S&P 500 recorded gains in the week. Growth stocks outperformed value stocks on weakness in the retail sector. Energy(XLE), Industrials(XLI) and Consumer Discretionary(XLY) were among top performers. Exxon Mobil and Dow component Chevron topped estimates amid the spike in energy prices and increased demand. Dow member Apple and Amazon posted stronger-than-expected results help lifted Consumer Discretionary and Tech indexes. Refer to below sector indexes weekly performance table.

Technically there have been rallies in the past two week for all the three indexes but still in downtrend. Nasdaq was the strongest one with 20dma had a bullish crossover 50dma in the week.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets eased after a high-level meeting of the ruling Communist Party dropped calls that it will strive to meet its 2022 growth target and gave no indication of new stimulus. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) eased 0.5% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, fell 1.6%.

“The meeting urged efforts to consolidate the upward trend of economic recovery, keep employment and prices stable, keep the economy running within an appropriate range, and strive for the best possible outcome,” state media reported. Analysts said that the statement signaled that the government was implicitly giving up on its annual growth target of about 5.5% without setting a new number. On Thursday, the IMF lowered its full-year growth forecast for China to 3.3% from its April forecast of 4.4% and reduced its 2023 forecast by half of a percentage point to 4.6%.

Hang Seng index(.HSI weekly chart) fell to its lowest in nine weeks as Alibaba Group Holding to Meituan paced losses amid renewed regulatory concerns. Technically, the index appears still weak below both its 20 and 50dma.

The tech sector was weak after The Wall Street Journal reported that Jack Ma, founder of e-commerce giant Alibaba Group, was planning to cede control over Ant Group, the financial technology group spun off from Alibaba in 2011. Ant operates the world’s largest mobile payment app Alipay, which has more than 1 billion users and is indirectly controlled by Ma. On Monday, Alibaba announced plans for a primary listing in Hong Kong while keeping its U.S. listing.

Singapore

STI index (STI weekly chart) advanced 1% for the week, its 2^nd consecutive weekly gains. Technically, the index had a bullish breakout two weeks ago after long time sideways consolidation, which built a strong base for bulls. Immediate next target (resistance) 3250, and downside support at 3150-3160 level.

Signs of Slowing Economy and Earnings, Possible Turnaround in Sentiment

Weekly Wrap Content for the week of Jul 22:

1. Week 29 major indexes performance;

2. Week 29 US sector indexes performance;

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

4. Contents inluding information sourced from various public market reports

U.S

For the week ended 22 Jul, U.S three major indexes registered their highest close in seven-week streak, as stocks carried over momentum from late the previous week as investors appeared to welcome signs of a slowing economy and fading inflationary pressures. Stocks rose for the week, adding to a run that put the S&P 500(SPX) up 9% over the last month, though still down around 17% YTD. Signs of peaking inflation, relief from rising yields and most recently, corporate earnings announcements believed to be the supportive catalysts for the rally. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Q2 earning reports are undergoing, many of which indicated a slowing economy but also some greater resilience in corporate profits and outlooks than many had expected. Dow component American Express rallied after topping expectations. SNAP reported a flat increase in advertising revenue in the second quarter and failed to offer guidance for the remainder of the year. 

2.    Longer-term U.S. Treasury yields hit two-month lows on weak economic data. Preliminary July manufacturing and services sector reports all signaled slowing business activity, notably a drop into contraction territory for the U.S. services sector. The weak economic data briefly pushed the yield on the benchmark 10-year U.S. Treasury note down to 2.73% on Friday morning, its lowest level in nearly two months.

SPX sectors in play

Nine out of 11 sectors in the S&P 500 recorded gains. Small-cap shares and the technology-heavy Nasdaq Composite outperformed. Consumer discretionary(XLY) shares performed best, helped by rebounds in Amazon.com and Tesla, while the typically defensive health care(XLV) and utilities(XLU) sectors lagged. Weakness in Verizon and Google parent Alphabet also weighed on communication services(XLC) shares. Refer to below sector indexes weekly performance table.

Technically all three indexes are still in downtrend, but have crossed and closed above both 20 and 50dma since they crossed below in Apr. Technically bullish signs.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets posted mixed returns after Premier Li Keqiang tempered expectations of excessive stimulus and indicated flexibility on China’s annual growth target. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) added 1.3% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, dipped 0.2%.

At a meeting of global business leaders hosted by the World Economic Forum, Li said that as long as employment is relatively sufficient, household income grows, and prices are stable, slightly higher or lower growth rates are both acceptable. China issued a growth target of about 5.5% for 2022 at a Politburo meeting in April, but many economists believe that Beijing will have a hard time meeting its goal.

China’s cybersecurity regulator fined Didi Global CNY 8 billion (USD 1.2 billion), potentially signaling an end to the government’s crackdown on the ride-hailing app and clearing a path for a public listing in Hong Kong. Didi was one of the most high-profile targets of Beijing’s clampdown on the country’s internet industry starting in 2020, when regulators unexpectedly canceled the initial public offering of Ant Group.

Hang Seng index(.HSI weekly chart) advanced, taking the index to its best weekly gain this month after China’s banking regulator pledged to take measures to defuse a property and banking crisis caused by a credit squeeze. Technically, the index appears still weak below both its 20 and 50dma.   

Singapore

STI index (STI weekly chart) advanced 2.65% for the week, its best since Feb 11 week. Technically, the index has had a bullish breakout this week from its six-week sideway consolidation range, closed at six-week high. Immediate next target (resistance) 3250, and downside support at 3100 level.

Inflation Under Spotlight, Stocks Volatile

Weekly Wrap Content for the week of Jul 15:

1. Week 28 major indexes performance;

2. Week 28 US sector indexes performance;

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

U.S

For the week ended 15 Jul, U.S stocks remained volatile in light summer trading, as investors absorbed inflation data and the first major second-quarter corporate earnings reports. On Thursday morning, the S&P 500 Index touched its lowest intraday level since June 22 but rallied sharply to end the week. The week’s inflation data seemed to be interpreted as unambiguously good news, helping to spark a solid rally to end the week. Americans’ inflation expectations appear to moderate. The decline seemed to feed expectations that the Fed would move less aggressively than feared at its next policy meeting, raising rates by 75 basis points (0.75%) rather than the 100 basis points futures markets had begun to indicate. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation. Wednesday morning’s data uniformly came in hotter than expected, sending markets sharply lower. The Labor Department reported that the consumer price index (CPI) rose by 9.1% over the 12 months ended in June, the highest increase since 1981, with prices jumping 1.3% in June alone. 

2.    Yield curve inversion. The yield on the benchmark 10-year U.S. Treasury note fell over the week, as an inversion in the closely watched 2-year/10-year segment of the Treasury yield curve, considered by some to be a recession signal, reached its widest level since 2000. The 10-2 Yield spread at -20.42(-0.2%).

SPX sectors in play

All but one out of 11 sectors in the S&P 500 in red. Consumer Staples(XLP) was the only sector closed with gains. On Friday, Technology(XLK) stocks were among the best performers, helped by solid gains in Apple. Energy(XLE) stocks underperformed this week as international oil prices fell to levels not seen since before Russia’s invasion of Ukraine. Refer to below sector indexes weekly performance table.

Technically all three indexes are still in downtrend, but have been in sideway consolidation for past five weeks already. Inflation holds the key to a durable rebound.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets eased as data revealed that the country’s economy slowed sharply in the second quarter, and a growing movement among homebuyers to stop paying their mortgages hurt property and banking shares. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) fell around 3.8% this week.

China’s GDP for the June quarter grew a worse-than-expected 0.4% from a year earlier, official data showed, compared with a 4.8% expansion recorded in the first quarter. Friday’s GDP followed reports of a rapidly growing number of Chinese homebuyers who have refused to pay mortgages for unfinished construction projects. Homebuyers have halted mortgage payments on at least 100 projects in more than 50 cities across China as of Wednesday, a sharp increase from just days before, Bloomberg reported.

Hang Seng index(.HSI weekly chart) suffered worst week in two years since March 2020. An inquiry into an alleged data leak pummelled Alibaba Group Holding and other tech peers. Goldman cuts China forecast on weak GDP. Technically, the index slumped to seven-week low.  

Singapore

STI index (STI weekly chart) was down 32.11points or 1% for the week. Technically, the index has been trading sideways consolidation for the past five weeks, in the range of 3072 to 3165, technical indicators appear weak with major technical support to watch for coming week(s) at around 3050, immediate upside resistance at 3150.

U.S Stocks Rebound, SPX Out of Bear Market Territoty

Weekly Wrap Content for the week of Jul 8:

1. Week 27 major indexes performance;

2. Week 27 US sector indexes performance;

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

U.S

For the week ended 8 Jul, U.S stocks erased much of the previous week’s losses on optimism that the Federal Reserve will be able to curb inflation without tipping the economy into a recession. The gains pulled the S&P 500 Index out of bear market territory, leaving it down 19.1% from its January peak at the close of trading Friday. Economic data appeared to dominate sentiment, as investors sought to assess the possible impact on Fed policy. The moderating economic data may have prompted some investors to brush off the hawkish stance that the Federal Reserve reiterated in its June meeting minutes, which were released on Wednesday. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Friday’s payrolls report from the Labour Department showed employers added 372,000 nonfarm jobs in June, well above consensus expectations of around 270,000. 

2.    The ISM released final estimates of services activity in June, which came in modestly above consensus estimates but indicated a continuing slowdown in growth. The ISM’s measure hit its lowest level since June 2020, and its employment gauge fell into contraction territory for the third time this year, according to Reuters. 

3.    The yield curve – The stronger-than-expected jobs report lifted the yield on the benchmark 10-year U.S. Treasury note to roughly 3.10% at the close of trading on Friday amid a broad rise in U.S. rates. The closely watched 2-year/10-year segment of the Treasury yield curve inverted as the 2-year yield climbed above the 10-year yield—a common, if imperfect, signal of a coming recession.

SPX sectors in play

Five out of 11 sectors in the S&P 500 recorded gains this week. The large Communication Services(XLC), Consumer Discretionary(XLY), and Technology(XLK) sectors performed best within the index. Energy(XLE) shares fell sharply on Tue as domestic oil prices fell back below USD 100 per barrel for the first time in nearly two months, but they rallied alongside crude prices later in the week. Refer to below sector indexes weekly performance table.

Technically all three indexes are still in downtrend, but with some positive signs as they closed above 20dma and approaching to 50dma, indicate bulls are trying to fight back.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets eased as rising coronavirus cases and elevated geopolitical tensions hurt sentiment. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) fell around 1%.

China’s Ministry of Finance is considering allowing local governments to sell CNY 1.5 trillion (USD 220 billion) of special bonds in the second half of this year to boost infrastructure funding, Bloomberg reported. Reuters reported that China will set up a state infrastructure investment fund worth CNY 500 billion (USD 74.69 billion) to spur infrastructure spending and support the economy.

In economic readings, the Caixin Services Purchasing Managers’ Index (PMI) for June surged to a better-than-expected 54.5 from 41.4 in May, the latest evidence that China’s economy is recovering from easing virus restrictions.

Hang Seng index(.HSI weekly chart) fell 0.61%, gave back its previous weekly gain.  Technically, the index still shows positive sign of recovery as it closed above its 20 and 50dma.  

Singapore

STI index (STI weekly chart) has been in 3^rd week of sideway consolidation, within its range of 3090-3165. Major technical support to watch at around 3050 level.

Recession Worries Deepen

Weekly Wrap Content for the week of Jul 1:

1. Week 26 major indexes performance;

2. Week 26 US sector indexes performance;

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

U.S

For the week ended 1 Jul, U.S stocks surrendered a portion of the previous week’s strong gains, as worries grew that the Federal Reserve’s fight against inflation would push the economy into recession.

The S&P 500 Index closed out its worst first half of the year since 1970, as was widely reported, although the decline was amplified by the index reaching its all-time high on January 3. Typically defensive segments within the index, such as utilities and consumer staples, held up best, while consumer discretionary and information technology shares were particularly weak. Markets were slated to be closed on Monday, July 4, in observance of the Independence Day holiday. Refer to major indexes’ weekly performance tables below.

The S&P 500 Index ended the first half down about 20%, in bear-market territory, which historically is a signal itself that the economy is in a recession or one is pending. Since 1950, nearly 70% of bear markets coincided with recessions.

Key highlights for the week and outlook:

1.    Much of the week’s economic data missed consensus expectations, and some signals suggested that economic activity might even be slowing. May personal consumption expenditures (PCE), adjusted for inflation, fell 0.4% in May, the first decline in 2022. 

2.    The silver lining for investors in the PCE data was a downside surprise in inflation signals. The Fed’s preferred inflation gauge, the core (less food and energy) PCE price index came in at 4.7% for the 12 months ended in May, slightly below expectations and the lowest level since November. 

3.    The yield curve – the difference between the 10-year and two-year yield – has also flattened, now around 0.05%, closing in on 0.0% and even turning negative, or inverting. The flattening yield curve is certainly another signal of growth concerns ahead.

SPX sectors in play

Four out of 11 sectors in the S&P 500 recorded strong gains. Defensive sectors such as Utilities(XLE), Energy(XLE) and Consumer Staples(XLP) stocks outperformed this week. Consumer Discretionary(XLY) and Technology(XLK) stocks were among top losers. Refer to below sector indexes weekly performance table.

The sectors that have relatively outperformed this year, aside from energy, have been defensive parts of the market: utilities, consumer staples, and health care. These are traditionally considered "recession-proof," as households generally consume these items regardless of economic conditions.

Technically all three indexes are still in downtrend, their weekly charts are as follows.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China markets advanced on the back of strong factory data and easing coronavirus restrictions for travelers. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) rose 1.13%, and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, gained 1.6%.

On Tuesday, China halved the quarantine times for inbound travelers. Under the new policy, travelers must spend seven days in a quarantine facility then monitor their health at home for three days, down from 14 days under hotel quarantine in many parts of the country and as many as 21 days of isolation in the past.

In economic readings, the official manufacturing and services purchasing managers’ index (PMI) both rose above 50 in June as a drop in new omicron infections allowed the government to ease restrictions. The manufacturing PMI reached 50.2 in June, up from 49.6 in May, while the nonmanufacturing PMI rebounded to 54.7 in June from 47.8 in May.

Hang Seng index(.HSI weekly chart) closed up 0.65% the holiday-shortened week, it hit intra-week high since Apr 2022 on Tuesday but was down two days after that by profit-taking along other markets as recession worries deepened. Technical indicators remain bullish. It’s now trading above 20and 50dmas.

Singapore

STI index (STI weekly chart) appears flattish, edged down 0.52% slightly this week, closed near its three-week bottom 3100. Major technical support to watch at around 3050 level.