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