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