Stocks Tumbled Following Fed Rate Hike

Weekly Wrap Content for the week of Sep 23:

1. Week 38 major indexes performance;

2. Week 38 US sector indexes performance;

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

U.S

For the week ended Sep 23, U.S stocks recorded a second week of pronounced losses after Fed revealed that they expected official short-term interest rates to continue going sharply higher over the next several months. Investors continued to digest Wednesday's third-straight 75-basis point rate hike from the Fed, as well as rate increases from the Bank of England and Swiss National Bank. The DJI index fell to new intraday lows since late 2020, while the SPX and Nasdaq Composite managed to stay slightly above their bottoms in mid-June 2022. The fear index Cboe Volatility Index (VIX), stayed more firmly below its spring highs but rose sharply at the end of the week. The technology-heavy Nasdaq Composite Index fared worst for the second consecutive week and briefly fell to a level more than one-third below its January record high. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Fed rate hike: The Fed hiked its policy rate by another 75 basis points (0.75%), bringing it to a target range of 3.00% to 3.25% and raised its outlook for potential additional hikes ahead. The Fed moved the goalposts on upcoming rate hikes, catching the markets off guard and increasing fears of recession. Many expect rates to reach 4.50% by the end of the year and stay near there for much of 2023.   

2.    Bear market territory. The stock market retest 20% bear-market threshold this week, giving back summer gains. SPX index rallied more than 17% from mid-June to mid-August, but falling back below 20% for the week. 

3.    Interest rates rose to their highest in more than a decade. 2-year Treasury yield rose above 4% for the first time since 2007, the 10-year yield hit an 11-year high.

SPX sectors in play

All 11 sectors in the S&P 500 ended in the red for 2nd week. Energy(XLE) and Consumer Discretionary(XLY) fell the most, Energy stocks especially weak as crude oil price fell below 80 and hit two-month low this week.

Technically all three major indexes recorded 2^nd losing streak, with SPX and Nasdaq(COMP) closed just above their Jun low, DJI appears weaker and closed fresh new low since Nov last year.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets fell as global growth slowdown fears gripped investors. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) slipped 1.2% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, dropped 1.9%.

On Friday, the yuan currency fell to a near 28-month low and traded at 7.1066 per U.S. dollar versus 7.0185 a week earlier, according to Reuters. The Fed’s aggressive tightening has boosted the dollar at the expense of the yuan and other emerging markets currencies this year. China’s surprise decision to lower key interest rates in August has also fueled the yuan’s slide.

The Asian Development Bank was the latest to downgrade its growth estimate for China to 3.3% this year from a prior 4.0% estimate. Beijing’s official growth target this year is about 5.5%, a level that many economists believe is unattainable.

Hang Seng index (.HSI weekly chart) lost 4.4% this week, closed lowest since November 2011. The benchmark has now lost 20 per cent from the peak on June 28, enters bear market as sell-off in Alibaba, Tencent, developers deepens amid rate-hike worries.

Singapore

STI index (STI weekly chart) also lost 1.3% this week. Technically, the index has formed a possible double top on its weekly chart which is bearish signal, but it would require the index to break down support at 3198 to form a lower low for confirmation, in coming week.

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

Wall Street Suffered Largest Weekly Drop in Three Months

Weekly Wrap Content for the week of Sep 16:

1. Week 37 major indexes performance;

2. Week 37 US sector indexes performance;

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

U.S

For the week ended Sep 16, U.S stocks fell sharply as inflation fears intensified and short-term bond yields reached levels last seen in 2007. The S&P 500 Index recorded its largest weekly drop since mid-June and hit its lowest point on an intraday basis since mid-July. Hot inflation reports released earlier this week solidified expectations that the Fed, and other central banks around the world, will remain ultra-aggressive with their monetary policy. The markets appeared to be pricing in a 75-basis-point rate hike as the most probable outcome for next week's Fed meeting. Growth stocks fared worst, with the technology-heavy Nasdaq Composite falling nearly 5.5%. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation Report: Tuesday’s consumer price index (CPI) report, which came in above expectations and dimmed hopes for some investors that the economy had moved beyond “peak inflation.” Headline prices rose 8.3% for the 12 months ended in August versus consensus expectations for an increase of around 8.1%. 

2.    Global Recess: After the market closed on Thursday, FedEx(FDX) announced that it was pulling its earnings guidance for fiscal year 2023 due to “expectations for a continued volatile operating environment,” and its new CEO told a CNBC interviewer that he expected a global recession. FedEx stock fell by about 21% in trading on Friday. 

3.    Treasury yield: Amid expectations for a continuation of rapid monetary tightening, the two-year U.S. Treasury note yield traded around 3.90% early Friday morning—its highest level in nearly 15 years. 

4.    Fed rate hikes: Disappointing inflation data and a further decline in jobless claims cemented investors’ expectations for a minimum 0.75-percentage-point interest rate hike at the Federal Reserve’s next meeting. Federal funds futures markets by midweek were pricing in a roughly one-third chance of a one-percentage-point Fed rate hike, though this probability declined somewhat by Friday morning.

SPX sectors in play

All 11 sectors in the S&P 500 ended in the red this week. Communication services(XLC) and information technology(XLK) shares led the declines as Google parent Alphabet and Facebook parent Meta Platforms hit new 52-week lows. Industrials(XLI) and materials(XLB) shares were also especially weak.

Technically all three major indexes hit two-month new low this week, technology dominant Nasdaq composite index fell the most with 5.48% loss.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets fell as currency weakness and downbeat property data overshadowed surprisingly strong factory output and retail sales indicators. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) tumbled 4.2%  and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, sank 3.9% in its biggest weekly drop in two months.

The People’s Bank of China drained liquidity from the banking system for the second straight month but held interest rates steady as it sought to ease selling pressure on the yuan resulting from a widening policy divergence with the Federal Reserve. The Fed’s hawkish tightening stance has boosted the dollar this year, pressuring most emerging market currencies, while China’s surprise decision to lower key interest rates in August has accelerated the yuan’s slide.

China reported better-than-expected growth in factory output and retail sales last month. Industrial production rose 4.2% year on year in August, up from 3.8% in July, while retail sales jumped 5.4% year on year from July’s 2.7% growth.

Hang Seng index (.HSI weekly chart) tumbled to near its Mar 15 low this week, sending the benchmark to a 3^rd straight weekly loss. Technically, the index appears extremely weak, probability of testing Mar 15 low at 18235 level increases, which is also around a multiple year key technical support level.

Singapore

STI index (STI weekly chart) bucked the trend and edged higher this week. Technically, the index has been in recovery mode in past two weeks and approaching its recent high. Immediate downside support at around 3240 its 200 and 20dma, upside resistance at 3307 previous high.

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

Wall Street Rebounded from Losing Streak

Weekly Wrap Content for the week of Sep 9:

1. Week 36 major indexes performance;

2. Week 36 US sector indexes performance;

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

U.S

For the holiday-shortened week ended Sep 9, U.S stocks broke a string of three weekly losses, as investors appeared to grow more confident that the market had reached at least a temporary bottom after surrendering about half of its summer rally. Some moderating inflation fears may have also been at work, and a midweek decline in oil prices—which briefly hit their lowest level since Russia’s invasion of Ukraine—caused energy shares to underperform within the S&P 500 Index, although the sector still recorded a gain. SPX rebounded and recovered all its previous weekly loss, formed a bullish weekly reversal candlestick pattern, which is an encourage sign for bulls. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Fed policy: The Fed has prioritized its credibility in bringing down inflation over an effort to support ongoing robust economic demand. Market expectation for another 75-basis-point (0.75%) hike later this month, likely to take the rate to the 3.5%-4% range as we move into 2023 then possibly pause and evaluate. 

2.    Stock market: After falling more than 20% this year, equities have mustered a solid rally, rising more than 15% from mid-June to mid-August. It’s expected we are in the midst of a bottoming process for the markets, navigating a U-shaped recovery (instead of a V-shaped rebound). 

3.    Inflation: It is noted that signs that inflation was cooling quicker than expected also seemed to support sentiment. Stocks rallied after the Wednesday afternoon release of the Fed’s “Beige Book” summarizing economic reports from its branch banks. The report indicated that price increases were moderating in nine of its 12 districts, as “lower fuel prices and cooling overall demand alleviated cost pressures, especially freight shipping rates.”

SPX sectors in play

All 11 sectors in the S&P 500 rebounded this week. A rally in heavily weighted Tesla helped the consumer discretionary(XLY) sector outperform. Energy(XLE) stocks lagged as crude oil prices declined- which briefly hit their lowest level since Russia’s invasion of Ukraine. Refer to below sector indexes weekly performance table.

Technically all three major indexes rallied after three-week losing streak, technology dominant Nasdaq composite index led the rallies with 4.1% gain.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets rose as tame inflation data and expectations of further policy support prompted buying. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) advanced 2.4% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, added 1.7%.

Inflation cools, but so does trade and domestic demand. China’s consumer and factory gate inflation in August declined from July’s levels and came in below analysts’ expectations. Consumer prices rose 2.5% over the 12 months ended in August, while factory gate prices rose 2.5%, down sharply from 4.2% the previous month.

Hang Seng index (.HSI weekly chart) rallied on Friday and recovered nearly all its earlier losses in the week. Technically, the index has formed a weekly hammer candlestick which is a bullish reversal sign, a true reversal will only be confirmed if it continues to rebound coming week.

Singapore

STI index (STI weekly chart) also rebounded 57pts or 1.8% to 3262.95 this week. Technically, the index has recovered nearly all its previous three weeks’ losses this week. Immediate downside support at 3200- around its recent low. The index closed above all its major moving averages which is bullish.

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

Hawkish Fed Continues to Weigh on Stocks

Weekly Wrap Content for the week of Sep 2:

1. Week 35 major indexes performance;

2. Week 35 US sector indexes performance;

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

U.S

For the week ended Sep 2, U.S stocks finished solidly lower heading into the Labour Day holiday weekend, erasing early gains that came in the wake of the August labour report, and notching a third week of losses. While the report showed job growth was slightly higher than expected and wage gains moderated, it didn't appear to cool off some of the elevated expectations about how aggressive the Fed will be later this month. The S&P 500 Index extended the daily losing streak that began with Fed Chair Jerome Powell’s August 26 speech at the central bank’s Jackson Hole conference, widely perceived as hawkish. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Monthly job gains still strong. Friday’s August jobs report showed that the economy added 315k jobs last month, a number seen as solid though down from a revised 526k in July. The unemployment rate rose to 3.7% from 3.5% in July as the labor force participation rate increased. 

2.    Rates hikes. Fed chairman Jerome Powell told investors at Jackson Hole that the Fed is committed to raising rates and fighting inflation until it "gets the job done." Markets now are still forecasting a 75 basis-point (0.75%) rate hike at the September FOMC meeting and a terminal fed funds rate of close to 4.0%, with expectations of Fed rate cuts removed from mid-2023 forecasts. 

3.    Bulls’ potential turnaround. Upcoming two key factors: midterm elections and a potential Fed pause in 2023. Midterm elections will be held on Tuesday, November 8th this year. Historically, the period after mid-term elections tends to be positive for markets, regardless of which party wins. Markets expectations for the Federal Reserve to raise rates to 4% by December 2022 and keep rates at elevated levels at least through 2023. 

4.    Economy still strong. The ISM manufacturing index, which tends to be a good proxy of economic activity in the U.S., came in at 52.8 for August, above expectations of 52.0. A reading above 50 indicates economic activity is generally expanding. The strength of the labor market and the resilience of the ISM manufacturing index point to a U.S. economy that remains healthy and has some cushion to absorb the ongoing interest rate increases.

SPX sectors in play

All 11 sectors in the S&P 500 fell this week. Value stocks continued to outperform high-valuation growth stocks, and large-caps held up significantly better than small-cap shares. Energy(XLE) shares suffered as oil prices declined below USD 90 per barrel for West Texas Intermediate(WTI) crude, the U.S. benchmark. The growth-oriented technology(XLK) stocks continue suffering from selling pressure in anticipation of upcoming rate hike this month. Refer to below sector indexes weekly performance table.

Technically all three major indexes pulled back for 3^rd week, technology dominant Nasdaq composite index led the losses with 4.2% down.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets fell as coronavirus outbreaks in major cities triggered renewed lockdowns and dampened the economic outlook.  The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) retreated 1.54% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, slipped 2.04%.

In the southern tech hub of Shenzhen, most of the city’s nearly 18 million residents were under virus-related controls amid the most serious outbreak since the spring. In southwestern China, Chengdu, the capital of Sichuan province, went into lockdown Thursday with mass testing planned through the weekend. The southern port city of Guangzhou also imposed restrictions. As estimated by research firm Capital Economics, 41 Chinese cities, responsible for 32% of the country’s gross domestic product, are grappling with coronavirus outbreaks, the highest number since April.

China said it would implement a landmark audit agreement it struck with the U.S. last month. Both countries signed a preliminary deal on August 26 that would allow U.S. accounting officials to review the audit papers of U.S.-listed Chinese companies, resolving a yearslong dispute that threatened to kick off about 200 Chinese companies from U.S. exchanges.

The official manufacturing Purchasing Managers’ Index (PMI) rose to 49.4 in August from July’s 49.0, above expectations but still below the 50-point mark that separates contraction from growth. Meanwhile, the private Caixin manufacturing PMI declined to 49.5 in August from 50.4 in July, reflecting the impact of nationwide power shortages and virus lockdowns. China has room to adjust monetary policy as stimulus measures to support the economy have been restrained and consumer inflation is under control, a People’s Bank of China spokeswoman said.

Hang Seng index (.HSI weekly chart) fell 2.65% this week. Technically, the index has been trapped in a five-week sideway consolidation range near recent bottom.  

Singapore

STI index (STI weekly chart) fell 43.84pts or 1.3% to 3205.69 this week. Technically, the index closed at its lowest in five weeks, it’s currently still trading in a short-term downtrend started four weeks ago. Immediate downside support at 3190- around its 50dma level. The trio local banks appear resilient and holding up well, STI index grinding lower but seems selling is still under control.

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