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.