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.