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.