U.S Stocks Retreat on Rate Fears

Weekly Wrap Content for the week of Aug 19:

1. Week 33 major indexes performance;

2. Week 33 US sector indexes performance;

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

U.S

For the week ended Aug 19, U.S stocks closed in negative territory, causing the S&P 500 to snap its four-week winning streak. The halt in the market’s rally came amid the release of the minutes from July’s FOMC meeting earlier this week, in which comments indicated that the central bank would likely continue to hike rates in the short term. The U.S. dollar resumed a rally and is near multi-decade highs, while Treasuries fell to boost yields and the inversions on the curve remain intact. Crude oil gained ground, while gold prices traded lower. Subdued summer trading was accompanied by some volatility Friday as USD 2.3 trillion in options expired. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Bullard doesn’t see inflation peak. In an interview with The Wall Street Journal on Thursday, St. Louis Fed President James Bullard questioned whether inflation had really peaked despite the surprise downturn in the year-over-year increase in the consumer price index (from 9.1% in June to 8.5% in July) reported the previous week. He was likely to vote in favor of another 75-basis-point increase in the federal funds target rate at the Fed’s next policy meeting. 

2.    July data generally surprise on the upside. Some upward surprises in the week’s economic data may have fueled rate fears, even as they offered hope that the economy would avoid a recession. 1) Retail sales proved more resilient than expected in July, rising 0.7% once the volatile gas and auto segments were excluded. 2) Industrial production was also strong, rising 0.6% in the month, roughly twice consensus expectations. 3) Weekly jobless claims ticked lower, betraying expectations for an increase.

SPX sectors in play

Only three out of 11 sectors in the S&P 500 advanced this week. The growth-oriented technology(XLK) and communication services(XLC) sectors underperformed, with the latter dragged down by a sharp decline in Facebook parent Meta Platforms. Energy stocks(XLE) and Consumer Staples(XLP) outperformed. Refer to below sector indexes weekly performance table.

Technically all three major indexes declined, after four-week winning streak. Technology dominant Nasdaq composite index led the losses with 2.6% down.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets posted a loss for the week in reaction to weak economic data and elevated levels of COVID cases, with drought conditions in parts of the country adding to the gloom. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) dipped 0.6% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, eased 1%.

Data released during the week showed retail sales in July grew 2.7% year on year while industrial output was 3.8% higher than a year ago. Both data sets were below expectations. In the property sector, data showed China’s home prices fell for an 11th month in July. New home prices in 70 cities declined 0.11% from June, when they fell 0.1%, according to the National Bureau of Statistics. Existing-home prices fell 0.21%, the same as a month earlier.

It was the worst seven-day period for China in terms of COVID infections since mid-May, with more than 18,000 new local cases recorded, Bloomberg reported. The government also issued a national drought alert as soaring temperatures threatened crops and industrial activity, with regions from Sichuan in the southwest to Shanghai in the Yangtze Delta facing extreme heat. The severe heat wave has sparked power shortages and forest blazes. Sichuan, which accounts for 5% of China’s gross domestic product, is exceptionally vulnerable due to its reliance on hydropower.

The PBOC lowered its seven-day reverse repo rate—the main rate at which it provides short-term liquidity to banks—to 2.00% from 2.10% and the one-year Medium-Term Lending Facility (MLF) rate to 2.75% from 2.85%. More steps could follow, including a cut in the loan prime rate (LPR). The LPR is a lending reference rate set monthly by 18 banks and announced by the PBOC.

Hang Seng index (.HSI weekly chart) was down 2% this week. Technically, the index formed an inside-bar on its weekly chart within previous’ week. Technical indicators appear still weak while it trading near its May bottom.

Singapore

STI index (STI weekly chart) eased 0.7% this week-its 2^nd weekly loss. Technically, it appears the index is in profit-taking after a previous strong three-week rally, given back partial of its gains, rather than bearish downtrend. The STI index has been outperformed YTD as compared to other major indexes in my table above. Immediate support at 3238- its 200dma level.

Source: Contents/Data including information from various public market reports

U.S Inflation Moderated, Stocks Rally

Weekly Wrap Content for the week of Aug 12:

1. Week 32 major indexes performance;

2. Week 32 US sector indexes performance;

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

*Contents/Data including information from various public market reports

U.S

For the week ended Aug 12, U.S stocks closed solidly higher to cap off a week that saw the S&P 500 notch its fourth-straight weekly gain. Equities appeared to be spurred on by the positive sentiment brought about by a round of cooler inflation data this week, which has helped ease expectations of how aggressive the Fed will remain going forward.

Since the beginning of the third quarter (June 30), equity markets have had a stellar move higher, with the S&P 500 up over 12%, cutting its losses for the year nearly in half. Similarly, the technology-heavy Nasdaq is up about 17%, bringing its losses for the year down to about -17%. And this week's inflation readings have only helped add to the positive momentum we have seen over the past six weeks or so. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation. Headline inflation came in nicely below expectations for the month of July, largely driven by lower fuel and energy prices. In July we had seen average U.S. gasoline prices fall by around 8% and WTI crude oil down by 11% over the month of June. This supported a headline CPI inflation that came in at 8.5%, versus expectations of 8.7%, and below last month's 9.1% reading. 

2.    Markets expect the fed funds rate to climb to the 3.50% - 3.75% range in 2022, before pausing in 2023. Markets now expect a 50-basis-point rate hike (0.50%) at the September meeting versus a 75-basis-point hike just earlier this week. The expectation now is for another 50-basis-point hike in November, followed by a 25-basis-point hike in December, bringing the fed funds rate to a 3.50%-3.75% range before pausing.

SPX sectors in play

All 11 sectors in the S&P 500 advanced this week, led by Energy stocks(XLE), Consumer Staples(XLP) lagged. Refer to below sector indexes weekly performance table.

Technically all three major indexes hit new high since 2 May, Nasdaq and SPX recorded their 4^th weekly gains.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets ended the week on a mixed note as a flare-up in coronavirus cases offset news of a record trade surplus last month and a central bank report signaling support for growth. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) added 1.5% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, inched up 0.8%.

The spike in coronavirus infections coupled with a continued housing market slowdown are considered among the largest risks to China’s economy in the near term. Coronavirus cases in China climbed to a three-month high, roughly half of them recorded in the southern coastal island of Hainan, which was widely locked down last week. China reported a record trade surplus of USD 101.26 billion in July, surpassing the USD 90 billion consensus forecast.

Hang Seng index(.HSI weekly chart) edged lower 0.1% this week. Technically, the index formed a directionless weekly candlestick within previous’ week. A breakout above 20250 weekly high would give early signal for a bullish reversal.

Singapore

STI index (STI weekly chart) eased 0.4% this week after three-week up streak. Technically, STI weekly chart appears still bullish, immediate resistance 3307 weekly high, and downside support at 3235- its 200dma level.

U.S. Stocks Mixed After Strong Jobs Report

Weekly Wrap Content for the week of Aug 5:

1. Week 31 major indexes performance;

2. Week 31 US sector indexes performance;

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

*Contents/Data including information from various public market reports

U.S

For the week ended Aug 5, U.S stocks were mixed as a much stronger-than-expected jobs report revived investor concerns that the Federal Reserve will need to maintain an aggressive pace of interest rate hikes to tamp down high inflation. The Nasdaq Composite. Russell 2000, and S&P 500 Index finished with gains, while the Dow Jones Industrial Average recorded negative results. Equity markets continued to receive support from above-consensus corporate earnings reports. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Job market still strong. Friday’s payrolls report from the Labor Department showed employers added 528,000 nonfarm jobs in July, more than double consensus expectations of around 250,000, and May and June estimates were revised up by a combined 28,000. Following the strong July gains, total nonfarm employment in the U.S. has now returned to its pre-pandemic level. The unemployment rate fell to 3.5%, matching its February 2020 level. 

2.    Treasury Yields Increase. The strong payroll report and hawkish messaging from Fed officials helped drive U.S. Treasury yields higher over the week, outweighing downward pressure from rising U.S.-China tensions following House Speaker Nancy Pelosi’s visit to Taiwan.

SPX sectors in play

Six out of 11 sectors in the S&P 500 recorded gains in the week. Big cap growth stocks outperformed. Tech(XLK), Communication Services(XLC) and Consumer Discretionary(XLY) were among top sectors gainers. While Energy(XLE) lagged. Refer to below sector indexes weekly performance table.

Technically Nasdaq and SPX recorded 3^rd weekly gains while Dow eased after two weeks gains.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets eased as geopolitical tensions, mortgage boycotts, and tepid economic data kept buyers on the sidelines. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) fell 0.8% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, fell 0.3%.

U.S. House of Representatives Speaker Nancy Pelosi’s trip to Taiwan infuriated Beijing, which held live-fire drills in the waters around the self-ruled island and imposed sanctions on Pelosi and her immediate family. Chinese chipmakers’ shares jumped as traders bet that the government would increase support for the domestic semiconductor industry at a time when the U.S. is ramping up efforts to curb China’s rise in chip manufacturing. Last week, the U.S. Congress passed the CHIPS and Science Act, which aims to prop up the U.S. semiconductor industry and contains restrictions on chip firms considering expanding in China.

On the economy front, the official manufacturing purchasing managers’ index (PMI) fell to 49.0 in July from 50.2 in June, below the 50-point mark that separates contraction from growth and the lowest in three months. The non-manufacturing business activity index fell to 53.8 from 54.7 in June and the composite PMI, which includes manufacturing and services, fell to 52.5 from 54.1.

Hang Seng index(.HSI weekly chart) edged higher on close after spiked down intra-week new low since May 13.  Technically, the index appears still weak below both its 20 and 50dma.

Singapore

STI index (STI weekly chart) advanced 3rd consecutive week. Technically, the index closed up every day this week, led by banking stocks. Immediate next target (resistance) 3300, and downside support at 3235- its 200dma level.