Stocks end Mixed in Light Holiday Trading

Weekly Wrap Content for the week of Dec 23:

1. Week 51 major indexes performance;

2. Week 51 US sector indexes performance;

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

U.S.

For the week of Dec 23, the U.S major indexes were mixed in a week of generally quiet holiday season trading. The Dow Jones Industrial Average Index(DJI) recorded modest gains, SPX closed flat while the Nasdaq Composite(COMP) dropped nearly 2% despite recording its best daily gain since November on Wednesday. Hawkish comments from the Federal Reserve and other global central banks over the previous week continued to be a key factor weighing on markets. Some of the week’s economic signals may also have intensified fears of future rate hikes. U.S financial markets closed on Monday Dec 26 for the Christmas holiday. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:      

1.    U.S. Q3 GDP revised up. Government data released Thursday that the U.S economic growth in the third quarter was upped from 2.9% to 3.2%, boosted by upward revision of personal consumption. The U.S. economy contracted in the first half of the year with GDP declining in the first and second quarters, stoking worries of recession. The week's upward revision to third quarter GDP suggests that economic activity rebounded nicely in the second half of the year.

2.    Jobless claims surprised modestly on the downside, and continuing claims recorded their first weekly drop since Oct, which show a still resilient job market. 

3.   Yield rise, dollar index down. The US dollar dropped to its six-month low, U.S treasury rates climbed through most of the week, partly in response to actions by Japan’s central bank. Traders cited the Bank of Japan’s (BoJ) surprise decision to widen the allowed band around 10-year Japanese government bond (JGB) yields as a driver of higher U.S. rates and a steeper Treasury curve. 

SPX sectors in play

Six out of 11 sectors within the SPX index closed positive for the week. Energy stocks(XLE) outperformed as U.S. oil inventories came in well below consensus expectations. Consumer discretionary(XLY) shares performed worst, dragged lower by a steep decline in Tesla(TSLA) following the electric vehicle maker’s announcement of increased price discounts. Semiconductor(XLK) stocks also sold off on Thursday after chipmaker Micron Technology reported falling global demand. Refer to below SPX sector indexes weekly performance table. 

Indexes technical levels

Technically, the three major indexes closed mixed for the week. While DJI index rebounded after two consecutive weeks down, both Nasdaq and SPX indexes recorded their 3^rd weekly drop in a row. Nasdaq pulled back closer to its Oct/Nov low(support) level around 10300, SPX still trapped within its previous monthly price range. Click to view below the three major indexes’ weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stocks fell as a spike in coronavirus cases weighed on the country’s growth outlook. The Shanghai Composite Index was down 3.85% and the blue chip CSI 300 Index declined 3.19%. In Hong Kong, the Hang Seng Index added 0.7%.

SSE weekly chart

.HSI weekly chart

The World Bank cut its China economic growth forecasts for this year and next due to the pandemic and the country’s ongoing property market slump. The bank projected that China’s economy would grow 2.7% this year and 4.3% in 2023, down from its September forecasts of 2.8% growth this year and 4.5% in 2023.

China’s government stepped up calls to bolster the economy in 2023 following the prior week’s Central Economic Work Conference, an annual meeting in which officials discuss policy goals for the coming year.

The People’s Bank of China issued a statement confirming that it would support a recovery in consumption and guide financial institutions to back property sector mergers and acquisitions.

Technically, SSE index slumped to its six-week low for the week, closed below major moving averages 20/50 and 200dma which is bearish. While .HSI index edged higher and was consolidating around its 200dma level, appears bullish.

Singapore

STI index edged 0.52% up this week. Technically, the STI index still consolidating within its six weeks tight trading range between 3314-3322 area, while trading above all major moving averages (20,50, and 200MAs) which is bullish bias. 

STI weekly chart

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

Stocks Fell over Fears of Rising Interest and Recession

Weekly Wrap Content for the week of Dec 16:

1. Week 50 major indexes performance;

2. Week 50 US sector indexes performance;

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

U.S

For the week of Dec 16, the U.S stocks was pushed lower for a 2^nd consecutive week and to a levels last seen in early Nov, by intensified fears over rising interest rates and risk of falling into recession.  Two highly anticipated announcements during the week appeared to send sentiment in opposite directions—much higher at the start of the week and sharply lower at its end. The first was the release of the CPI before trading began on Tuesday. The second was the release of the Fed December statement on Wednesday afternoon, followed by Fed Chair Jerome Powell’s press conference, sent stocks sharply lower. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                 

1.    Fed rate: The Fed raises interest rates by 0.50% and indicates a 5.1% peak fed funds rate. As expected, the FOMC raised rates by 0.50% at its December meeting in the week, bringing the fed funds rate to about 4.5%. In his comments, Fed Chair Powell went out of his way to say that while recent inflation data has been encouraging, inflation broadly remains elevated and well above the Fed's 2.0% target. Fighting inflation continues to remain its top priority, not the impact of higher rates on economic growth. 

2.    CPI: Consumer price index (CPI) inflation came in cooler than expected. CPI inflation data for November came in below expectations, with headline inflation of 7.1% year-over-year versus expectations of a 7.3% figure. 

3.    Retail sales for November come in weaker than expected. U.S. retail sales for the month of November came in below expectations, falling -0.6% month-over-month, versus forecasts of down 0.15%. This figure also came in well below last month's 1.3% growth. The U.S. economy is nearly 70% driven by consumption, and slowing retail sales is perhaps the first signal that consumer demand may be stalling.

 SPX sectors in play

Nearly every sector within the index recorded sharp losses with the exception of energy shares(XLE), which were supported by a partial rebound in oil prices. Consumer Discretionary(XLY) and Communication Services(XLC) sectors lagged. Telsa price dropped more than 16% this week to a new low since Nov 2021, contributed much of the consumer discretionary sector underperformance. Refer to below SPX sector indexes weekly performance table.  

Indexes technical levels

Technically, all the three major indexes closed 2^nd consecutive week down. While DJI index retreated to its downtrend line support but still above its 200dma level. SPX tested its major downtrend line intra-week and selloff, still in downtrend. Nasdaq Composite index is the weakest among the three, had downside breakout from its four-week sideways consolidation area. Click to view below the three major indexes’ weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stocks fell as weaker-than-expected economic data dampened investor sentiment. The Shanghai Composite Index was down 1.22% and the blue chip CSI 300 Index declined 1.1%, reversing several weeks of gains. Remarks from Vice Premier Liu He indicating that Beijing is considering new measures to support the real estate industry lifted property sector stocks. Hang Seng Index fell 2.26%, recorded first weekly loss after two consecutive week rally.

SSE weekly chart

.HSI weekly chart

COVID lockdowns weigh on data. A trio of key economic indicators for November came in weaker than expected as pandemic-related disruptions weighed on activity. Industrial production rose by 2.2% in November from a year earlier, marking the softest growth since May, while retail sales declined by 5.9%. Fixed asset investment for the year through November also missed forecasts.

Technically, SSE index rebounded to testing its major downtrend line and traded above 200dma intra-week but unable to hold above it end of the week, closed just beneath it. While .HSI index also displays similiar pattern, tested its 200dma but closed just below it end the week.

Singapore

STI index edged lower 0.16% this week. Technically, the STI index still consolidating within its previous 4 weeks trading range between 3314-3322 area, while trading above all major moving averages (20,50, and 200MAs) which is bullish bias. Do take note of the wicks of the weekly candlesticks, which indicate selling pressure above, bearish.

STI weekly chart

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

Stocks Fell on Strong Economic Data

Weekly Wrap Content for the week of Dec 9:

1. Week 49 major indexes performance;

2. Week 49 US sector indexes performance;

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

U.S

For the week of Dec 9, the U.S stocks gave back much of the previous two weeks’ gains, as some surprisingly strong economic data dampened hopes that the Federal Reserve might soon be able to curb its program of raising interest rates to cool inflation. The S&P 500 Index recorded its worst return in five weeks, while the small-cap Russell 2000 Index endured its worst week since late September. The S&P 500 unable to stay above its 200-day moving average following the recent rally. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                

1.    Strong services sector data. ISM index of services sector activity reported beginning of the week rose to 56.5, near its highs over the past several months. The ISM noted a particular pickup in business activity, especially in real estate and food services and accommodation. 

2.    PPI(Producer price inflation) data released on Friday surprised moderately to the upside, rising 7.4% yoy, beat expectations of around 7.2%, sending stock futures sharply lower. 

3.    Bond yields. The yield curve (10-year rates minus 2-year rates) falling to deeply inverted territory, as short-term rates reflect restrictive Fed policy and longer-term rates signal falling inflation and a declining GDP growth outlook. The deeply inverted yield curve indicating fixed-income investors are concerned about economic growth prospects.

SPX sectors in play

All 11 sectors in the S&P 500 ended in the red this week. The typically defensive health care(XLV), consumer staples(XLP), and utilities(XLU) sectors fared best. Energy(XLE) shares fell sharply as international oil prices tumbled to their lowest level since January, while weakness in Google parent Alphabet weighed heavily on communication services(XLC) stocks. Financials(XLF) also performed poorly as several bank executives offered negative outlooks. Goldman Sachs’ CEO David Solomon warned about pay and job cuts as well as “some bumpy times ahead,” while JPMorgan Chase CEO Jamie Dimon told CNBC that a “mild to hard recession” may hit next year. Refer to below SPX sector indexes weekly performance table. 

Indexes technical levels

Technically, DJI index closed 1^st week down after four-week up streak, also its first time closed below 20dma in two-month time. SPX given back its previous two weeks gain and unable to hold above 200dma this week after recent rally. Nasdaq closed at four-week low. 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 rose as Beijing’s rapid easing of coronavirus pandemic restrictions bolstered investor sentiment despite an expected surge in infections in the coming months. The Shanghai Composite Index gained 1.61%, while Hong Kong’s Hang Seng Index added 6.56%.

SSE weekly chart

.HSI weekly chart

China shifts from zero-COVID to reopening. Chinese officials announced a 10-point guideline to their new COVID prevention and control measures. The new measures outlined by the State Council include home quarantine for people with mild symptoms, a vaccination program for the elderly, and reducing mass testing requirements in many cities. Lockdowns in high-risk areas would be lifted if no new cases appeared for five consecutive days.

Many analysts have noted that China’s rapid shift from zero-COVID could be a headwind for the economy and increase business uncertainty if infections and deaths start to rise.

Global demand slows, inflation eases. Weak trade data tempered optimism about reopening. China’s exports fell a bigger-than-forecast 8.7% in November from a year earlier, marking the steepest monthly drop in exports since February 2020.

Technically, SSE index rebounded to testing its major downtrend line drawn since it beginning of the down move in Dec last year. While .HSI index made an awesome “V-shape” rebound, has since recovered its full losses from Sep-Oct, there are still plenty of room to upside after the recent rally, the .HSI index still losing 15% YTD.

Singapore

STI index retreated 0.4%, dropped near to its four-week sideway bottom. The index appears still in range-bound consolidation mode after end Oct- mid Nov rally.

STI weekly chart

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

Stocks Higher on Expectation of Slower Rate Hikes

Weekly Wrap Content for the week of Dec 2:

1. Week 48 major indexes performance;

2. Week 48 US sector indexes performance;

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

U.S

For the week of Dec 2, U.S stocks ended higher, buoyed by the possibility that the Federal Reserve may slow the pace of its interest rate increases. Growth stocks outperformed their value counterparts in the S&P 500 Index, while the technology-heavy Nasdaq Composite Index posted solid gains. The “traditional economy” Dow Jones Industrial Average (Dow), however, took a bit of a breather and ended modestly higher. Still, the Dow did enter bull market territory on the final day of November, when it closed more than 20% above the low it hit in September 2022. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:                

1.     Strong jobs. Nonfarm payrolls report on Friday shows the U.S. economy added 263k jobs, more than the 200k expected and largely on par with October's upwardly revised pace. Strong November jobs report complicates the Fed's efforts. While this strength is good news for the economy, it was interpreted as bad news for the markets because it implies that the Fed is having little impact on slowing wage growth.

 

2.     Inflation. Last week the PCE Price Index, the Federal Reserve's preferred gauge of inflation, fell to 5.0% from 5.2% a year ago in October and increased 0.2% from the previous month, less than expected. Together with the cooler consumer price index (CPI) data reported three weeks ago and the disinflationary signals from several leading indicators of prices that we track, they suggest that inflation could fall back sharply over the course of 2023.

 

3.     Rate hikes. Powell says pace of tightening could slow but reiterates rates likely to be higher for longer. The likely stepdown to a 0.5% rate hike at the Fed's next meeting on December 13-14 was signaled earlier by the minutes of the November meeting, and the market was already pricing in that outcome. While it has been a long and painful way as interest-rate expectations kept adjusting higher throughout the year, there now seems to be some light at the end of the Fed's tightening tunnel, and market expectations for the peak fed funds rate have stabilized around 5% (even after the strong jobs data).

 

4.     Chinese economy implication. The recent headlines of covid-19 policies seem to be moving in the right direction, and Chinese stocks were sharply higher in November on reopening hopes.  The tweaks to zero-COVID-19 policy, combined with additional measures to support the property market and easing monetary policy, all signal that China is starting to put more emphasis on growth. A potential stabilization in China's economic outlook and a softening of the U.S. dollar as the Fed dials down its rate hikes could prove to be tailwinds for international investments in 2023.

 

SPX sectors in play

10 out of 11 sectors in the S&P 500 ended green this week. Growth stocks outperformed their value counterpart. Communication Services(XLC) and Consumer Discretionary(XLY) were top sectors, while Financials(XLF) and Energy(XLE) lagged. Refer to below SPX sector indexes weekly performance table.  

Indexes technical levels

Technically, DJI index was in its 4^th weekly gains streak, has since rebounded more than 20% from its Sep 2022 low, considered as entered bull market territory technically. Both Nasdaq and SPX were closed 2^nd weekly gain. It’s worth noting the SPX index is approaching major downtrend line drawn from its peak in Jan, a bullish sign if it can cross over above it. 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 rose amid signs that the Fed would slow the pace of interest rate hikes and that Beijing was moving closer to fully reopening the economy after months of pandemic controls. The Shanghai Composite Index gained 1.8%, while Hong Kong’s Hang Seng Index rallied 6.3%.

SSE weekly chart

.HSI weekly chart 

Beijing eases quarantine measures following unrest. Signs that China was edging away from its zero-tolerance approach to the coronavirus lifted sentiment. China’s National Health Commission announced that it will boost vaccination rates among the elderly, a move seen as crucial for the economy to fully reopen. Days later, China’s most senior official in charge of the coronavirus response, Vice Premier Sun Chunlan, said that efforts to combat the virus were moving to a “new phase” as the omicron variant weakens and more people are vaccinated, state media reported. Beijing also plans to start allowing low-risk infected individuals to isolate from home rather than in government quarantine sites, Bloomberg reported, citing unnamed officials.

PMIs disappoint. PMI readings for manufacturing and nonmanufacturing weakened in November. The private Caixin China General Manufacturing PMI rose more than expected to 49.4 from October’s reading. However, the measure remained under 50, indicating contraction as coronavirus outbreaks curtailed manufacturing activity nationwide.

Singapore

STI index edged higher 0.45% for the week, but still trapped within its four-week trading range- in sideway consolidation. With a month left in 2022, the STI index is up about 4.4% YTD. As comparison, Malaysia’s KLCI is down about 5%, the SPX is down about 14%, Nasdaq down about 27%, Hang Seng Index down about 10% and Shanghai Composite Index has lost about 13%.

Technically, the STI index is currently trading above all major moving averages which is bullish, immediate resistance level to watch is at around 3300-3340 area. And downside support at around 3230 level.

STI weekly chart

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