Stocks Rise on “Soft Landing” Hopes

Weekly Wrap Content for the week of Jan 27:

1. Week 4 major indexes performance;

2. Week 4 US sector indexes performance;

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

U.S.

For the week ended Jan 27, 2023, major U.S indexes resumed their winning streak, as investors appeared to welcome some hopeful signals that the economy might skirt a recession in 2023. Equities rose again last week, the third weekly gain in the last four, guided by a slew of corporate earnings announcements and fresh economic readings. 2023 is off to a strong start, stocks are up roughly 6% so far this year. Strong January returns have often been accompanied by positive full year returns. Refer to major indexes’ weekly performance tables below.

Key highlights for the year and outlook:       

1.    Bad years are typically followed by good ones as data shows. The S&P 500 declined 19.4% in 2022 (excluding dividends). Since 1950, there have been four previous calendar years in which the stock market fell more than 15%. The market rose, on average, 12.9% in the following year. 

2.    US economy overall finished 2022 on a fairly solid note, with GDP growing by 2.9% annualized pace in the fourth quarter, slightly better than expected. Consumer spending weakened from the previous period but remained positive. 

3.    Fed expected to establish a more accommodative policy stance in 2023. Walls Street Journal reporter cited recent comments from Fed governor Christopher Waller that he would support a quarter-point (0.5%) rate increase at the Fed’s next two-day policy meeting concluding Feb 1. 

4.    Earnings see hit from slowing economy. With companies representing roughly 20% of the S&P 500 Index market capitalization reporting results. Microsoft, the second-most heavily weighted stock in the index, fell sharply after the company reported a larger-than-expected decline in earnings and a slump in revenues that it expects to continue into 2023. Other weak performers included IBM and Intel.

SPX sectors in play

Nine out of 11 sectors within the SPX index closed positive for the week. Consumer discretionary stocks(XLY) were especially strong, thanks partly to a big jump in Tesla shares over the week following a favorable outlook from CEO Elon Musk. The typically defensive consumer staples(XLP), health care(XLV), and utilities(XLU) segments lagged. Relatedly, value stocks underperformed growth shares. Refer to below SPX sector indexes weekly performance table.  

Indexes technical levels

DJI index has been trapped(sideway consolidation) within its four-week trading range, Nasdaq has had a bullish breakout from its long-term downtrend line drawn from record high in 2021, it also had a bullish breakout from its double bottom weekly chart formation in the week, signalling growth stocks are coming back in play. SPX index- the most widely watched market barometer, also successfully breakout from its long term downtrend line drawn from 2021, it also crossed above its 250dma for the first time Apr 2022.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Financial markets in mainland China were closed for the Lunar New Year holiday, which started January 21, and will reopen on Monday, January 30.

The Hong Kong stock exchange resumed trading on Thursday, and the benchmark Hang Seng Index gained 2.96% for the holiday-shortened week. China’s domestic activity picked up significantly during the weeklong holiday, fueling optimism about a faster-than-anticipated economic recovery as people enjoyed the break from pandemic restrictions. Approximately 95.9 million trips were taken via road, rail, air, and waterways in the first four days of the holiday, or a daily average of 24 million trips compared with 18.6 million over the 2022 break, according to Ministry of Transport data.

SSE weekly chart

.HSI weekly chart

Technically, the Hang Seng Index closed 6^th week consecutive up, hit its highest level since Feb 2022-recovered its loss one year ago. Still plenty of room to upside for further rebound.

Singapore

STI index rallied and had a bullish breakout in the week finally- after 10 weeks a sideway consolidation in a tight trading range. It reached a level highest since Apr 2022. Next level to watch is previous high 3466 in Mar 2022.

STI weekly chart

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