Stocks Manage Gains Even as Big Tech Earnings Underwhelm

Weekly Wrap Content for the week of Oct 28:

1. Week 43 major indexes performance;

2. Week 43 US sector indexes performance;

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

U.S

For the week ended Oct 28, the U.S stocks rose but offered widely divergent returns for the week, as investors reacted to a busy calendar of third-quarter earnings reports. Energy and other industrial economy stocks handily outperformed growth shares, with the latter weighed down by steep declines in several mega-cap technology and internet-related stocks, including Microsoft, Amazon.com, Alphabet (parent of Google), and especially Meta Platforms (parent of Facebook), following earnings misses and lowered outlooks. Fed meeting scheduled in coming week on Nov 1-2. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                 

1.    Q3 earnings: Big Tech earnings underwhelm. 164 of the S&P 500 companies, or almost 50% of the index market cap, reported results in the week. The spotlight was on mega-cap technology companies, Alphabet, Microsoft, Meta, Apple and Amazon together account for 20% of the index, and, on average, their stocks declined 9% on the day of their earnings release. But the tone of the earnings updates was not one-sided. Several companies that rely broadly on consumer spending reported solid trends, such as Visa, American Express and Caterpillar. 

2.    Q3 GDP first estimate showed the economy expanding at an annualised rate of 2.6%, above consensus around 2.4% and the first positive reading this year. Resilient consumer spending and business investment, along with increased government outlays, helped offset a steep decline in residential investment—perhaps the first clear victim of the Fed’s rate hikes. 

3.    Fed rate hikes. Hopes that the Fed might slow its pace of rate increases seemed to be a driver of positive sentiment during the week. The week’s economic data offered conflicting signals on how much room the Fed has to maneuver. S&P Global’s gauge of U.S. manufacturing activity fell into contraction territory for the first time since June 2020.

SPX sectors in play

10 out of 11 sectors in the S&P 500 ended green this week. Industrials stocks(XLI) and Financials(XLF) outperformed. Communication Services(XLC) sector was the one in the red, dragged by several mega-cap tech and internet-related stocks, including Meta(parent of Facebook), Alphabet(parent of Google). Refer to below SPX sector indexes weekly performance table.  

Indexes technical levels

Technically, DJI index recorded its 4^th weekly up streak, closed above 200dma for the first time since Aug 2022, was the strongest index among the three. Nasdaq Composite Index closed 2^nd week up. SPX index rebounded above 50dma for 2^nd weekly gain as well.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets pulled back, as investor sentiment was dampened by new COVID-related lockdowns in several parts of China. Several Chinese cities doubled down on COVID-19 curbs after the country reported three straight days of more than 1,000 new cases nationwide. Data also showed that profits at China's industrial firms declined at a faster pace in September. The broad, capitalization-weighted Shanghai Composite Index fell 4.05%.

SSE weekly chart

Growth worries rattled investors despite better-than-expected GDP data reported for the third quarter during. China’s economy expanded 3.9% in July-September from a year earlier, faster than the 0.4% growth in the second quarter. After the closing of the Communist Party's 20th Congress, the People’s Bank of China and the State Administration of Foreign Exchange issued a joint statement that they would maintain the healthy development of stock and bond markets.

In Hong Kong, the Hang Seng index(.HSI weekly chart) tumble anew as Hang Seng Index closes below 15,000 mark for the first time in 13 years. Foreign funds fled amid mixed earnings reports from market heavyweights and before another Federal Reserve rate meeting next week. The index dropped lost 8.3% this week to close at 14863.06.

.HSI weekly chart

Singapore

STI index (STI weekly chart) rebounded 3% this week, reclaimed and closed above 3,000 level after spiking down the previous week. Bargain hunting and good earnings from banks lifted up the index.

STI weekly chart

 

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

Stocks Regain Upward Momentum

Weekly Wrap Content for the week of Oct 21:

1. Week 42 major indexes performance;

2. Week 42 US sector indexes performance;

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

U.S

For the week ended Oct 21, the U.S stocks recorded strong gains, as investors appeared to react to some prominent earnings reports and hints that the Federal Reserve might moderate its pace of interest rate hikes. The S&P 500 Index enjoyed its best weekly gain in nearly four months, while the Dow Jones Industrial Average marked its third consecutive week of gains. Investors also eyed events particularly the abrupt resignation of U.K. Prime Minister Liz Truss, along with a reversal in the UK government’s fiscal stimulus plans, which welcomed by markets with a strong start this week. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                 

1.    Q3 earnings results are largely meeting or beating expectations. About 20% of S&P 500 companies have reported third-quarter results, and about 73% have exceeded earnings forecasts, above the average of 70%. U.S. consumers remain resilient, despite looming economic headwinds. Big banks like J.P. Morgan, Bank of America and Goldman Sachs all highlighting solid consumer spending and low delinquency rates. In addition, companies across several consumer end-markets, including Netflix, United Airlines, and Procter & Gamble, have all beat earnings and noted resilient household demand. 

2.    Fed rate hikes. Wall Street Journal (WSJ) reported that said some Fed officials are concerned about overtightening monetary policy. The paper cited recent warnings from Kansas City Fed President Esther George that “a series of very super-sized rate increases might cause you to oversteer and not be able to see those turning points.” 

3.    Housing data that showed considerable weakening. The impact from higher rates has been most acutely felt in interest-rate-sensitive parts of the market, housing perhaps being the biggest among them. Mortgage rates in the U.S. have moved rapidly higher, now over 7.0% for a 30-year mortgage. An index of homebuilder sentiment also fell more than expected and hit a 10-year low. 

4.    Ten-year U.S. Treasury note yield hits 14-year high. The hawkish Fed comments pushed the yield on the benchmark 10-year U.S. Treasury note to a 14-year high of 4.33% on Friday morning. (Bond prices and yields move in opposite directions.)

SPX sectors in play

All 11 sectors in the S&P 500 ended green this week. Energy shares(XLE) outperformed, as oil prices proved resilient despite the announcement of a release from the U.S. Strategic Petroleum Reserve. The small real estate sector(XLRE) lagged. Refer to below SPX sector indexes weekly performance table.

Indexes technical levels

Technically, DJI index closed up 3rd straight week, Nasdaq Composite Index rebounded after it tested 61.8% Fibonacci retracement level last week which measured from starting of Mar 2020  and was considered last key defence level for bulls. SPX index tested its 50% Fibonacci retracement level last week and rebounded, recorded its best weekly gain in nearly four months.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets recorded a weekly loss after Beijing delayed releasing key economic data without explanation. The broad, capitalization-weighted Shanghai Composite Index eased 1.1%, and the blue chip CSI 300 Index (which tracks the largest listed companies in Shanghai and Shenzhen) slipped 2.6%.

SSE weekly chart

China’s statistics bureau announced last Monday that it would postpone releasing third-quarter gross domestic product (GDP) and other key indicators, including monthly readings of industrial production, fixed asset investment, and retail sales. The data were originally scheduled for release the next day. The bureau did not say when it would publish the data.

The weeklong Communist Party congress, which began October 16. The twice-a-decade gathering of the country’s top leadership was expected to wrap up on October 23 and hand President Xi Jinping a third five-year term as party chief.

Chinese technology shares retreated, pressured by reports that officials from the Ministry of Industry and Information Technology held emergency meetings with domestic chipmakers regarding the Biden administration’s recently announced restrictions on tech exports to China. The U.S. export curbs will likely have a chilling effect on U.S.-China relations over the long term and push both countries further down the path of decoupling.

In Hong Kong, the Hang Seng index slumped to the lowest level in more than 13 years while the offshore yuan weakened to a multi-year low amid growing concerns about China’s economic slowdown and faster rate increases in the US. The index dropped 2.3% this week to near 16,000 level intra-week.

Hang Seng weekly chart

Singapore

STI index fell 2.3% this week, closed below the 3,000 level on Friday (Oct 21) for the first time since March 2021. Technically, STI index has broken down 3000 psychological level, we could see further downside selling pressure if it can’t rebound above it the coming week.

STI weekly chart

 

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

Stocks Fell Weighted by Elevated Inflation Data

Weekly Wrap Content for the week of Oct 14:

1. Week 41 major indexes performance;

2. Week 41 US sector indexes performance;

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

U.S

For the week ended Oct 14, the U.S stocks were mostly lower, as third-quarter earnings reporting season began in earnest and investors weighed inflation data and their implications for Fed policy. By the end of the week, the S&P 500 Index had surrendered nearly half of its gains since its March 2020 bottom. Refer to major indexes’ weekly performance tables below.

This table below shows the performance of the stock market at various time periods after a bear market ends. The last seven bear markets have seen an average decline of 40%. Importantly, stay invested in order to reach your destination. Doing so enable you to participate in the rebounds, with historically averaging nearly a 50% gain in the first year alone.

Key highlights for the week and outlook:          

1.    Sep core consumer price index (CPI) inflation at four-decade high. Thursday’s CPI inflation data showed core consumer prices rose 6.6% on a yoy basis in September. This was more than expected, above the previous March peak, and the fastest pace in four decades. Stocks fell sharply on the news but quickly rebounded. 

2.    Q3 earnings kicked into gear with the release of mixed results from some banking sector heavyweights, as Dow member JPMorgan Chase and Citigroup both bested estimates, but Morgan Stanley and Wells Fargo fell short. Meanwhile, shares of Dow component UnitedHealth increased after beating estimates and upping its guidance.

SPX sectors in play

Three out of 11 sectors in the S&P 500 ended green this week. The typically defensive health care(XLV) and consumer staples(XLP) sectors outperformed, while consumer discretionary(XLY) and communication services(XLC) shares lagged, dragged lower by heavily weighted Amazon.com, Tesla, and Meta Platforms (parent of Facebook). Likewise, slower-growing value stocks handily outperformed their growth counterparts. Refer to below SPX sector indexes weekly performance table.  

Technically DJI index closed edged up for 2^nd week, but both Nasdaq and SPX indexes closed lower. SPX had surrendered nearly 50% of its gains since its March 2020 bottom, while the weaker technology dominated Nasdaq Composite Index closed at 61.8% Fibonacci retracement level, given back more than 60% of its gains in the same period. The DJI index gave back around 40% so far in the same period.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets rose after the weeklong National Day Holiday, lifted by supportive central bank comments and anticipation of policy signals during the Communist Party Congress, a twice-a-decade gathering of the country’s political elite that began on Sunday.  The broad, capitalization-weighted Shanghai Composite Index (SSE weekly chart)added 1.57%.

The People’s Bank of China (PBOC) will focus on supporting infrastructure construction and enabling quicker delivery of home projects, according to PBOC Governor Yi Gang. Last week, the state-run newspaper People’s Daily stated in a commentary that China must stick to zero-COVID because the policy is key to stabilizing the economy and protecting lives. The commentary dampened hopes that Beijing would relax the country’s zero-tolerance approach to the coronavirus anytime soon, despite its impact on China’s economy.

In Hong Kong, the Hang Seng index (.HSI weekly chart) recorded six-day losing streak and closed the week at new low in 11 years.

Singapore

STI index (STI weekly chart) fell 1.55% this week, closed new low since Mar 2021. Technically, STI index broken down key support around 3090 which we monitored closely for last few weeks. It’s expected to see the index to find support in between 3040-3000 which is an important psychological level.

 

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

Stocks Up After Giving Back Most Earlier Gains

Weekly Wrap Content for the week of Oct 7:

1. Week 40 major indexes performance;

2. Week 40 US sector indexes performance;

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

U.S

For the week ended Oct 7, the U.S stocks ended higher for the first time in four weeks but surrendered most of their gains, as some data suggested that the economy was not slowing enough to satisfy Federal Reserve policymakers. September nonfarm payroll report on Friday seemed to dampen recently increased optimism that the Fed could decelerate its aggressive monetary policy tightening campaign. Crude oil prices climbed following the decision from OPEC+ to cut oil production on Wednesday, and gold traded lower. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Sep PMI fell. The ISM gauge of manufacturing activity fell to 50.9 in September (levels under 50 indicate contraction), below consensus expectations and its lowest level since 2020. Further calming inflation fears, job openings fell to their lowest level in over a year. Bad news in economy is good news for stocks. 

2.    Inflation resurfaced on OPEC+ move. OPEC+ group announced a 2 million-barrel per day cut in target production. The benchmark price for a barrel of domestic oil rose by roughly USD 10 over the week, crossing the USD 90 mark for the first time since late August. 

3.    Inflation resurfaced on resilient labor market. Signs of labor market strength also seemed to deepen inflation fears. Nonfarm payroll on Friday revealed there were 263k jobs increase in September. Good news in economy is bad news for stocks.

SPX sectors in play

Seven out of 11 sectors in the S&P 500 ended green this week. Energy(XLE) was the standout performer in the S&P 500 Index as oil prices surged following a decision by major exporters to cut global production. XLE index rebounded 13.6% this week. Consumer Discretionary(XLY) lagged. Refer to below SPX sector indexes weekly performance table.  

Technically all three major indexes ended higher for the first time in four weeks. It appears market sentiment still very weak and bears are in dominant.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets were shut for the National Day holiday from October 1 to October 7. The weeklong break followed a risk-off September for Chinese assets as foreign investors sold off Chinese stocks and bonds and pushed the offshore yuan to a record low against the U.S. dollar at month-end. The onshore yuan exchange rate ended September near levels not seen since the 2008 global financial crisis, according to Bloomberg.

Beijing has stepped up measures to support the country’s debt-laden property sector ahead of China’s Communist Party congress, which is slated to start October 16 and last about one week.

In Hong Kong, China property stocks rose on reports that mainland financial regulators instructed the largest state-owned banks to extend at least CNY 600 billion (USD 85 billion) of net financing to the embattled property sector in the coming months. Hang Seng index (.HSI weekly chart) rebounded 3% this week, recorded its first time in six weeks.

Singapore

STI index (STI weekly chart) rebounded 15.6pts or 0.5% this week, 1^st time in three weeks. Technically, continues to watch STI index next key support at around 3090 area which is the consolidation bottom between Jun-Jul, also confluence with its uptrend line starts from the low of Mar 2020 pandemic outbreak.

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

The Bear Is Back- SPX Returns to Nov 2020 Levels

Weekly Wrap Content for the week of Sep 30:

1. Week 39 major indexes performance;

2. Week 39 US sector indexes performance;

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

U.S

For the week ended Sep 30, the U.S stocks broke below its mid-June lows and fell back to November 2020 levels. The SPX index closed this week at its third consecutive weekly decline, and also a third consecutive quarter of declines for the index for the first time since 2009. Attributed to the turmoil in UK financial markets and signs that the Fed still has some way to go in its efforts to temper inflation while the yield on the benchmark 10-year U.S. Treasury note briefly breached 4% for the first time since 2008. (Bond prices and yields move in opposite directions.) Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation still hot: Data showing continued resilience in the economy and inflationary pressures despite tightening monetary policy. Weekly jobless claims fell to 193k, well below expectation. Meanwhile, the core personal consumption expenditures price index, rose to 4.7%(annualized) in Q2- well above expectations of around 4.4% as well as the Fed’s long-term 2.0% inflation target. 

2.    10-year bond yield moved steadily higher this year, and went up nearly 4% on Tue. The rapid move higher in yields has put downward pressure on equity markets and valuations, especially the higher-valuation and more speculative parts of the market. 

3.    Strong USD. The U.S. dollar has been moving higher all year, with the DXY dollar index up nearly 17% this year and up 25% since early 2021. It reached the highest in more than a decade this week. There have been some disruptions in global markets due to a higher dollar, as major currencies around the world have weakened, signaling less confidence in those economies. In addition, the stronger dollar has put downward pressure on emerging-market equities, with the MSCI Emerging Market Index down nearly 30% this year.

SPX sectors in play

Only one out of 11 sectors in the S&P 500 ended green this week. Energy(XLE) rebounded 2.2% this week. Technology(XLK) sector was among the top losers this week.Refer to the SPX sector index's weekly performance tables below.

Technically all three major indexes recorded 3^rd losing streak, with Dow and SPX hit new low since Nov 2020 and Nasdaq(COMP) closed just inches above its Jun low.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets fell as currency weakness and signs of a flagging economy fueled concerns about the outlook. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) fell 2.1% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, shed 1.3%.

The yuan traded at 7.0898 per U.S. dollar late Friday versus 7.1066 a week earlier. The currency fell to a 28-month low last Monday and has lost more than 11% against the greenback this year. Like many emerging markets currencies, the yuan has weakened against a surging U.S. dollar boosted by the Federal Reserve’s aggressive interest rate hikes. Officials stepped up efforts to slow the currency’s slide.

The private Caixin PMI fell to a worse-than-expected 48.1 in September from 49.5 in August, below the 50-point reading that separates growth from contraction. Mainland China’s financial markets were scheduled to be closed for the Golden Week holiday, a seven-day holiday starting October 1 that typically marks a peak period for travel and consumption. However, ongoing coronavirus restrictions in major cities are expected to weigh on domestic tourism and retail spending this year.

Hang Seng index (.HSI weekly chart) lost another 4% this week recorded its 5^th week losing streak. The index lost 13.7% in Sep and fell 21% this quarter Q3 for the biggest decline since the same three months in 2011. Top losers in September included Alibaba and Tencent as they slumped at least 17 per cent; HSBC sank 15 per cent.

Singapore

STI index (STI weekly chart) lost 96.86pts or 3% this week, its largest loss since the week in May 9 this year. Technically, STI index next key support to watch at around 3090 area which is the consolidation bottom between Jun-Jul, also confluence with its uptrend line starts from the low of Mar 2020 pandemic outbreak.

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