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