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