Expected Slower Pace of Rate Hikes, Positive Earnings Lift Stocks

Weekly Wrap Content for the week of Nov 25:

1. Week 47 major indexes performance;

2. Week 47 US sector indexes performance;

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

U.S

For the week of Nov 25, the U.S stocks produced gains during the holiday-shortened week, with the S&P 500 Index finishing above the 4,000 level for the first time in two months. Favorable earnings reports in the retail and technology sectors as well as indications that the Federal Reserve is open to slowing its pace of rate hikes helped fuel the rally. Markets overcame worries early in the week about the potential impact of a new round of coronavirus-related lockdowns in China on global economies (see China section below). As expected, trading was light heading into the Thanksgiving holiday. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                 

1.    Rate hikes to slow down. The minutes from the Fed’s early-November policy meeting, which were released Wednesday, said that a “substantial majority of participants” thought that slowing the pace of hikes would be appropriate, although the fed funds rate may end up higher than previously expected. 

2.    Bond yields. As we approach the end of the Federal Reserve’s tightening cycle and a potential peak in yields, it’s expected the Fed’s final rate hike will likely occur in the first half of next year (likely February or March), implying that bond yields may be peaking in the months ahead. 

SPX sectors in play

All 11 sectors in the S&P 500 ended green this week. Defensive stocks such as Utilities(XLU) and Consumer Staples(XLP) outperformed. Energy(XLE) and Tech(XLK) lagged. Refer to below SPX sector indexes weekly performance table.  

Indexes technical levels

Technically, DJI index was in its 3^rd weekly gains streak, hitting seven-month high. Tech heavy Nasdaq index had an insider week, consolidating within its previous weekly range, while SPX closed above 4000 level for the first time in two months. Click to view below the three major indexes’ weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets were modestly positive for the week as investors balanced new coronavirus restrictions against signs that authorities will provide more supportive measures to stimulate the economy. News of additional funding for property developers also provided a boost to sentiment. The Shanghai Composite Index gained 0.14%, while Hong Kong’s Hang Seng Index eased 2.33%.

SSE weekly chart

.HSI weekly chart

COVID restrictions tightened across China as cases soar. Several cities in China imposed broad restrictions on movement and introduced mass testing as daily coronavirus cases approached all-time highs. Although no citywide lockdowns have been announced, the widespread restrictions have increasingly disturbed economic activities across the country, raising further concerns about the economic outlook in China even as authorities attempt to make their responses more targeted and less disruptive.

Chinese authorities step in to support economic growth. Chinese authorities increased hopes of further monetary stimulus as they attempt to amplify support for the Chinese economy, which is under strain from surging coronavirus cases and newly imposed lockdowns. On Friday, the People’s Bank of China announced a 25-basis-point cut to the reserve requirement ratio (RRR) for banks after it pledged that monetary tools will be used “in a timely and appropriate manner” to maintain reasonably ample liquidity, according to Bloomberg.

Singapore

STI index retreated 0.85% for the first time after four-week of consecutive up, seen profit-taking after hitting resistance around 3300 level, trading volume seen thin during World Cup and also black Friday holiday season. Immediate downside technical support at 3230- 200dma, upside resistance to continue watch around 3300 recent top.

STI weekly chart

DISCLAIMER: 

The above WeeklyWrap contains data/reports from various public available market reports

Stocks Fell Slightly as Investors Gauging Scale of Slowdown

Weekly Wrap Content for the week of Nov 18:

1. Week 46 major indexes performance;

2. Week 46 US sector indexes performance;

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

U.S

For the week of Nov 18, the U.S stocks gave back a portion of the previous week’s strong gains and closed modestly lower. Dispelled reports of a Russian missile strike on Polish territory sparked a brief sell-off on Tuesday, but trading volumes remained muted for much of the week. Markets will be closed on Thursday, November 24, in observance of the Thanksgiving holiday. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                

1.    Rate hikes. Fed officer Christopher Waller commented that Fed has “ a ways to go” before ending rate hikes. It’s expected the Fed will seek to pause its policy rate for an extended period to assess economic conditions.

2.    Cooling Inflation: Tuesday brought some more encouraging inflation data, with core (less food and energy) producer prices in October remaining flat for the first time in two years. 

3.    Labor market remains resilient, while manufacturing slows. Industrial production fell unexpectedly in October, weighed down by weakness in the energy and materials sectors, and a gauge of manufacturing activity in the Mid-Atlantic region tumbled to its lowest level since May 2020. 

SPX sectors in play

Eight out of 11 sectors in the S&P 500 ended green this week. Growth stocks lagged value-oriented shares, which were supported by gains in the consumer staples sector. The energy sector underperformed, however, as European oil and natural gas inventories reached near-peak levels. Consumer Staples(XLP) and Healthcare(XLV) outperformed, while Consumer Discretionary(XLY) lagged. Refer to below SPX sector indexes weekly performance table. 

Indexes technical levels

Technically, DJI index was the strongest among the three major indexes, stays above all major moving averages, while SPX and Nasdaq still below their 200DMAs, especially the techs have plenty room to upside to catch up. Click to view below the three major indexes’ weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets were modestly positive for the week, with the Shanghai Composite Index rising 0.32%, while Hong Kong’s Hang Seng Index performed better, gaining 3.85%.

SSE weekly chart

.HSI weekly chart

Investors appeared to balance enthusiasm over easing COVID restrictions against worries about rising cases. The seven-day average of new cases reached above 16,000 by the end of the week, with authorities recording a seven-month high of over 25,000 on Thursday alone, according to Reuters.

The impact of zero-COVID and the troubled housing sector on the consumer was evident in Monday’s October retail sales report, which showed sharp year-on-year declines in nearly all categories; sales of home appliances fell by over 14%, for example. Nevertheless, investors appeared to remain hopeful about recently announced support measures for the property sector. According to Reuters, officials have unveiled 16 new programs to shore up the property markets, including extending loans to both developers and homebuyers.

Prolonged Biden/Xi meeting raises hopes for cooling tensions. A three-hour meeting in Bali over the preceding weekend between U.S. President Joe Biden and Chinese President Xi Jinping appeared to boost sentiment.

Singapore

STI index was up1.4% for this week, recorded its 4th weekly gain. The rally is quite remarkable led by the trio local banks, added a total of 302.28 points or 10.2% in four weeks’ time, the index has since fully recovered its late Sep to mid Oct losses and formed a “V-shape” rebound. As I mentioned in my previous comment, the STI index immediate resistance level to watch is at around 3300 which is Aug-Sep top. It reached an intra-day high of 3308.30 on Friday and closed off it slightly by profit-taking.

It’s expected there would be high chance of profit-taking after four-week’s awesome run as the index facing a big technical gap between 3300-3340 atop(major resistance), immediate downside support at 3245-its 200dma level as the index trading above all major moving averages.

STI weekly chart

 

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

Stocks Surged on Cooling U.S Inflation, China’s Zero-Covid Policy Relaxation

Weekly Wrap Content for the week of Nov 11:

1. Week 45 major indexes performance;

2. Week 45 US sector indexes performance;

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

U.S

For the week of Nov 11, the U.S stocks recorded strong gains as investors celebrated reassuring inflation data and bond yields fell. The S&P 500 Index recorded its best week since June and hit its best intraday level in two months. After the release of consumer inflation data on Thursday, the index recorded its largest daily gain since April 2020. Growth stocks—technology and internet-related shares, in particular—benefited the most from falling yields, which typically increase the perceived value of future profits. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                

1.    Cooling Inflation: Data released on Thursday showed the headline consumer price index (CPI) rose 0.4% in October, less than consensus expectations of roughly 0.6% and bringing the year-over-year increase to 7.7%—still well above the Federal Reserve’s target, but the slowest increase since January. Also core inflation retreats to 6.3% from a 40-year high of 6.6% in September. 

2.    Midterm election: Tuesday’s midterm election results and the chance that the Democratic Party might retain some control of Congress may have weighed on markets when they opened on Wednesday morning, with some investors favoring a divided government that would restrain new spending and regulation. 

3.    FTX crypto exchange bankruptcy Saga: The collapse of the leading cryptocurrency exchange this week drove a further decline in Bitcoin and other currencies and appeared to foster some broader market volatility. 

SPX sectors in play

All 11 sectors in the S&P 500 ended green this week. Technology(XLK) and Communication Services(XLC) sectors outperformed. Growth stocks—technology and internet-related shares benefited the most from falling yields. The usual defensive Utilities(XLU) and Healthcare(XLV) stocks lagged. Refer to below SPX sector indexes weekly performance table.

Indexes technical levels

Technically, DJI index rebounded back to around three months high. SPX and Nasdaq indexes were back to around their two months’ respective highs. Dow was the strongest one which crossed major moving averages 200dma and 250dma already. Click to view below the three major indexes’ weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets received a late boost from the surprise drop in U.S. inflation but trailed most other global markets as investors worried about new signs of economic fragility.  The Shanghai Composite Index gained 0.54% this week.

SSE weekly chart

News of additional support for the troubled housing market helped provide some relief to property stocks. Chinese officials ordered second-tier banks to extend another USD 56 billion in loans to developers, according to Bloomberg.

A surge in COVID cases, with the number of daily cases reaching above 10,000 for the first time in over a year, threatened further lockdowns and appeared to weigh on sentiment for much of the week. Nevertheless, Friday’s rally also seemed to have been helped by a relaxation in China’s strict “zero-COVID” policy.

Data shows China’s Exports fell 0.3% in Oct, well below the 4.3% increase that that analysts polled by Reuters had predicted and the first drop since early in the pandemic. Imports also fell 0.7% as weakening domestic demand compensated for increases in purchases of most commodities.

In Hong Kong, the Hang Seng index rallied for 2^nd week in a row, gained another 7.21% after previous week’s 8.73% surge, which was the biggest weekly gain in 11 years.

.HSI weekly chart

Singapore

STI index closed 3^rd week up in a row, tested its 200dma at 3231 level on Friday and closed just off it.  Do watch immediate resistance level 3231(200dma) in coming week.

STI weekly chart

 

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

Stocks Sink on Dashed Hopes for a Fed Pivot

Weekly Wrap Content for the week of Nov 4:

1. Week 44 major indexes performance;

2. Week 44 US sector indexes performance;

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

U.S

For the week of Nov 4, U.S stocks fell after the Federal Reserve dashed market hopes for an impending pivot in monetary policy in the form of a pause or slower pace of rate hikes. Wednesday’s FOMC announcement and Fed Chair Jerome Powell’s post-meeting press conference were the focus of the week.

As was widely expected, the committee said that it was raising rates by 75 basis points. However, Powell’s press conference took a hawkish turn. Notably, Powell stated that it is “very premature” to consider pausing rate hikes, and the S&P 500 Index finished the day down 2.50%. The technology-heavy Nasdaq Composite Index was hit particularly hard as growth stocks declined more than value companies. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                

1.    Fed rate hike: Last week the Federal Reserve (Fed) raised the fed funds rate by 75 basis points (0.75%) at its November FOMC meeting. This was the Fed's fourth consecutive 75-basis-point rate hike, which brings the fed funds rate from near zero to 4.0% in about eight months, an unprecedented pace of interest-rate hikes in the U.S. economy. 

The Fed may move at a more gradual pace of rate hikes, but this does not mean a pause is coming. Markets currently expect the fed funds rate to rise to about 5.25% by March 2023. Historically, the 12 months following a peak in the fed funds rate has been positive for stock markets, with the S&P 500 returning on average about 15%. 

2.    Jobs remains resilient. Friday's nonfarm-payrolls jobs report for the month of October shows jobs increased by 261k, above expectations of 200k. The unemployment rate did tick higher to 3.7%, up from 3.5%, as labor-force participation moved lower, from 62.3% to 62.2%. 

While these labor figures reflect a solid labor market and healthy wage gains for consumers, they do little to deter the Fed from pushing forward with its rate-hiking campaign, especially since wage gains remain above pre-pandemic levels.

SPX sectors in play

Only three out of 11 sectors in the S&P 500 ended green this week. Energy(XLE) and  Industrials stocks(XLI) outperformed. Communication Services(XLC) and Technology(XLK) sectors lagged. Tech stocks suffered as the fallout from a largely disappointing earnings season for bellwethers such as Facebook parent Meta Platforms, Amazon.com, and Microsoft continued. Although it is now a private company, the deep job cuts expected at Twitter under new owner Elon Musk added to the malaise of the tech sector. Refer to below SPX sector indexes weekly performance table.  

Indexes technical levels

Technically, DJI index held up much better than tech-heavy Nasdaq Composite Index as growth stocks declined more than value companies. DJI fell 1.4% weekly after 4-week up streak, Nasdaq fell 5.65% and gave back all its previous two weeks gains, and SPX index declined 3.35% gave back its previous week’s gain. Click to view below the three major indexes’ weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets rallied amid speculation that the country was preparing to relax its zero-tolerance approach to the coronavirus. The broad, capitalization-weighted Shanghai Composite Index gained 5.3% this week.

SSE weekly chart

Several reports surfaced last week saying that China was preparing to retreat from the zero-COVID approach that has hurt the country’s economy. An unverified report widely circulated on social media stated that high-level officials met the prior weekend at the request of President Xi Jinping to discuss a conditional opening plan aimed at substantially opening by March 2023, Bloomberg reported.

Signs of progress in a longstanding auditing dispute between the U.S. and China also bolstered sentiment. U.S. audit officials completed their first on-site inspection round of Chinese companies ahead of schedule, with dozens of accounting inspectors scheduled to leave Hong Kong over the weekend, Bloomberg reported.

In economic news, official PMI readings for manufacturing and non-manufacturing activity in October both missed forecasts and landed below 50, the level separating growth from contraction.

In Hong Kong, the Hang Seng index(.HSI weekly chart) logged the biggest weekly gain in 11 years as mainland China funds added positions, and another round of speculation about the end of Beijing’s zero-Covid policy helped fan the rally. Alibaba, JD.com’s 12 per cent surge lifts Hong Kong stocks to best week since 2011.

Mainland funds have bought US$3.8 billion worth of shares in Hong Kong this week, adding to US$3.6 billion of inflows last week. Global bankers showed optimism in Hong Kong’s role as a super-connector to China’s financial markets during an investment summit.

.HSI weekly chart

Singapore

STI index ended 2nd weekly gain after an eventful week on 4 Nov, alongside most regional peers. Going forward, it’s expected China’s zero-Covid policy will be in forefront of market speculation until it’s been removed eventually. Market will also pay much attention to U.S midterm election results on coming Tuesday 8 Nov.

Technically, STI closed two-week up in a row, rebounding to between its 20 and 50dma in a downtrend. Immediate upside resistance area at around 50dma 3150 to 3168 recent high; and downside support at 3190-3170 area.

STI weekly chart

 

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