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