Stocks Suffer Biggest Decline in 10 Weeks

Weekly Wrap Content for the week of Feb 24:

1. Week 8 major indexes performance;

2. Week 8 US sector indexes performance;

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

U.S.

For the week ended Feb 24, 2023, major U.S indexes ended sharply lower. A cascade of upside inflation and growth surprises pushed the S&P 500 Index to its worst weekly loss since early December. At its close on Friday, the index had surrendered roughly 35% of the rally that began in October, but it remained up 3.40% for the year to date. The declines pushed the narrowly focused Dow Jones Industrial Average into negative territory for 2023, however. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation numbers hotter than expected. As released on Friday, core (less food and energy) personal consumption expenditures(PCE) price index jumped 0.6% in Jan, above expectations of an increase of 0.4% and its biggest rise since August. Additional data suggested that both consumers and employers were yet to be deterred by rising interest rates. 

2.    Market expects more rate hikes. According to CME Group data, futures markets began pricing in a roughly 27% chance of a half-point (0.50%) hike in the federal funds target rate at the upcoming March policy meeting, with approximately a 38% chance that the so-called terminal rate would reach a target range of 5.50% to 5.75% or higher.

SPX sectors in play

Only one out of 11 sectors within the SPX index closed positive for the week. Communication services(XLC) and consumer discretionary(XLY) stocks performed worst within the S&P 500, but the declines were widespread, and growth stocks fell only modestly more than value shares. Energy(XLE) stocks was the only sector edged higher for the week. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Among the major indexes, SPX fell 3^rd week, Dow fell four weeks in the row while Nasdaq record 1^st week down.  SPX closed just below its 50dma but rebounded from its 200dma on Friday. Market sentiment is weak but it appears the selling still under control. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese stocks advanced after three weeks of losses as hopes for stepped-up regulatory support offset concerns about elevated U.S. tensions. The Shanghai Stock Exchange Index(SSE) gained 1.34% and the blue chip CSI 300 added 0.66%. In Hong Kong, the benchmark Hang Seng Index fell 3.43% as a resurgent U.S. dollar added to concerns over the strength of China’s economic recovery.

Key highlights for the week and outlook for China/HK:

1.    China’s yuan currency dropped to a seven-week low against the dollar after the release of unexpectedly strong U.S. inflation data on Friday raised expectations that the Federal Reserve would keep raising interest rates. 

2.    The People’s Bank of China (PBOC) left its benchmark one-year and five-year loan prime rates unchanged for the sixth consecutive month, as expected.

Technically, Hang Seng Index(.HSI) fell 4^th week in a row to close at its 250dma support level, while SSE index closed 1^st week up after previous three-week decline. SSE index has been in over one month sideway consolidation.

SSE weekly chart

.HSI weekly chart

Singapore

STI index fell 4^th week in a row, pulled back to around its previous resistance-turn-support level around 3280. Its weekly closed below 50dma for the first time since Nov. Weekly trend still up as for now.

STI weekly chart

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

Stocks End Mixed on Data Surprises

Weekly Wrap Content for the week of Feb 17:

1. Week 7 major indexes performance;

2. Week 7 US sector indexes performance;

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

U.S.

For the week ended Feb 17, 2023, major U.S indexes ended mixed as investors weighed a still strong economy with positive momentum against worries that inflation trend might be taking an unfavourable turn. Data on Thursday (16 Feb) shows U.S producer price index(PPI) rebounded 0.7% in January, the largest increase since June. Also hawkish comments from Fed officials revived fears that the Fed will keep U.S rate stays higher for longer. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Strong consumer spending. U.S retail sales for January soared the most in almost two years, rose 3% MoM, well ahead of expected 2% increase. Consumer spending represents approximately 70% of GDP, and therefore as the consumer goes, so does the economy. 

2.    Slower than expected pace of disinflation. The consumer price index(CPI) for January just released shows Headline inflation eased slightly from 6.5% in Dec to 6.4% in Jan, and core CPI moved from 5.7% to 5.6%. That was a bit higher than consensus estimates, but still the lowest reading for headline inflation since Oct 2021. The producer price index (PPI) data released on Thursday also rose 0.7% in January, its biggest gain since June. 

3.    Fed on high alert. January’s unexpected consumer strength, exceptionally tight labor market, and persistent inflation challenge the Fed to keep interest rates higher for longer. Futures markets as tracked by CME Group began to price in an 18.1%% probability that the Fed would hike rates by a half point (0.50%) at its March policy meeting, almost double the chance priced in the week before. The Fed slowed its rate increase increment to a quarter point (0.25%) at its meeting early in the month. 

SPX sectors in play

Five out of 11 sectors within the SPX index closed positive for the week. Consumer Discretionary ( XLY) and Communication Services(XLC) were among top performing sectors, Energy(XLE) stocks lagged as fears that the Federal Reserve would need to raise short-term interest rates more than previously expected caused U.S. Treasury yields to increase and fostered a rise in the U.S. dollar, taking an especially large toll on oil prices and energy stocks. (Oil is priced in U.S. dollars on international markets, resulting in pressure on demand when the dollar appreciates.) Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Major indexes were mixed. SPX and DJI were lower but Nasdaq closed positive. Dow still strapped within its 7-week sideway consolidation range. Both SPX and Nasdaq were within their previous weekly trading range with little changes. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese equities fell for a third consecutive week as concerns over escalating geopolitical tensions with the U.S. hampered prospects of faster economic growth. The Shanghai Stock Exchange Index pulled back 1.12%, and the blue chip CSI 300 eased 1.75%. In Hong Kong, the benchmark Hang Seng Index retreated 2.22%.

Key highlights for the week and outlook for China/HK:

1.    Housing’s slide may have come to an end. Bloomberg reported that prices for new homes in China remained roughly steady in January, breaking a 16-month slide, as demand received a boost from the government lifting of its zero-COVID regime. 

2.    Meanwhile, the People’s Bank of China (PBOC) injected a further CNY 199 billion into China’s fiscal system via its one-year medium-term lending facility.

Technically, Both SSE and .HSI fell for 3^rd week in a row. Both indexes appear in “healthy” profit-taking mode.

SSE weekly chart

.HSI weekly chart

Singapore

STI index fell just over 32 points or 1 per cent in an eventful week led by domestic happenings. These included Budget 2023, economic data for the fourth quarter of 2022, as well as January trade data. Technically, the index fell 3^rd week in a row, closed below 20 and 50dma, weekly trend still bullish.

STI weekly chart

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

Stocks Posted Losses For the Week

Weekly Wrap Content for the week of Feb 10:

1. Week 6 major indexes performance;

2. Week 6 US sector indexes performance;

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

U.S.

For the week ended Feb 10, 2023, major U.S indexes ended lower in a week with relatively few important economic releases or other concrete drivers of sentiment. Sector performance was relatively uniform within the S&P 500 Index, with energy stocks being the notable upside outlier and communication services shares the prominent laggard. Some uncertainty and volatility returned to markets. The S&P 500 was down over 1.0% on the week, its worst week of the year thus far. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation continues to moderate. Better inflation data has been a key driver for markets over the past several months. Headline CPI inflation in the U.S. has come down for six straight months. Market forecasts now call for headline inflation to fall to under 4.0% by year-end and closer to 2.5% by 2024. The next CPI inflation reading in the U.S. is on Tuesday, with expectations for headline inflation to fall from 6.5% to 6.2% and core inflation to fall from 5.7% to 5.4% annually. Any negative surprises could spark outsized market volatility. 

2.    Fed not done. Federal Reserve sees rate hikes continuing as needed. Some believe that after the strong jobs report last month, the final fed-funds target rate could move above the 5.1% outlined in the Fed's last "dot plot." As a result, Treasury yields have moved higher recently, and higher yields broadly have put downward pressure on markets, especially higher-valuation and longer-duration parts of the market. 

3.   Chatbot led Artificial intelligence(AI) takes centre stage. AI and innovation once again make the headlines. The Microsoft-backed ChatGPT has already added 100 million active users, just two months into its launch, making it the fastest-growing app in history. The open-market competition between highly skilled tech players could lead to innovations that benefit all consumers. More innovation can ultimately lead to higher productivity, which supports better potential economic growth rates over time.

4.   Earnings mixed. About 70% of companies in the S&P 500 have reported fourth-quarter earnings, and results have been mixed at best. Of these companies, about 70% have had positive earnings surprises, well below the five-year average of 77%.

SPX sectors in play

Only one out of 11 sectors within the SPX index closed positive for the week. Energy(XLE) was the only sector closed up, Communication Services(XLC) lagged.

The most significant stock-specific event for the broad benchmarks was a plunge in shares of Google parent Alphabet, which lost roughly USD 100 billion in market capitalization on Wednesday and fell roughly 10% for the week. The shares plunged after Reuters reported that Google’s new artificial intelligence (AI)-based chatbot, Bard, mistakenly identified the first satellite to take a picture of an exoplanet in its first public demonstration on Monday. Refer to below sector ETFs weekly performance table.

Indexes technical levels

Major indexes were lower. SPX pulled back to just above its 20dma after previous week’s golden crosss between 50 and 200dma—still a bullish sign. Dow still strapped within its six-week sideway consolidation range. Nasdaq fell for the 1^st week after five-week up row. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese equities retreated as the spy balloon controversy fanned tensions with the U.S. and offset expectations of faster economic growth following China’s exit from pandemic controls. The Shanghai Stock Exchange Index and the CSI 300 Index both recorded slight declines for the second straight week as the diplomatic crisis over the balloon in U.S. airspace reminded investors of the geopolitical risks of investing in the country.

Key highlights for the week and outlook for China/HK:

1.    The spy balloon incident raised the prospect of further sanctions on China from the U.S. after the Biden administration announced a sweeping ban on U.S. companies selling advanced semiconductors and certain chip manufacturing equipment to China last October.

2.    Investors appear to have turned more cautious about China’s outlook following a three-month rally driven by reopening optimism that began last November amid speculation that China was preparing to unwind its strict zero-COVID policy, which Beijing rolled back in December.

Technically, SSE fell for 2^nd week after a four-week good rally previously, and Hang Seng Indexes recorded 2^nd weekly losses after previous six-week up streak. Both indexes appear in “healthy” profit-taking mode.

SSE weekly chart

.HSI weekly chart

Singapore

STI index fell 23.6points or 0.70%, its 2^nd weekly loss in a row, technical appear that bulls are in absolute charge and we are looking for further upside move. Next level to watch is previous high 3466 in Mar 2022.

STI weekly chart

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

Stocks Up While Interest Rates Down, Fed and Jobs So Far So Good

Weekly Wrap Content for the week of Feb 3:

1. Week 5 major indexes performance;

2. Week 5 US sector indexes performance;

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

U.S.

For the week ended Feb 3, 2023, major U.S indexes were another up week– its fourth in the first five weeks of 2023. Stock market extended their winning streaks into February, helped by some upside surprises in economic data and Q4 earnings reports, as well as what some saw as encouraging signals from the Federal Reserve. The S&P 500 Index reached an intraday high of 4,195 on Thursday, its best level since late August. The S&P 500 now up nearly 8% on the year. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Strong Jobs data. The January employment report released on Friday showed that the economy added a whopping 517k jobs last month, more than double the consensus forecast. The unemployment rate slipped to 3.4%, its lowest level since 1969. While other parts of the economy are showing signs of slowing, the healthy labor market should offer support for consumer spending, helping moderate a potential downturn. 

2.    US Stocks rallied last week following the Fed's latest meeting in which it announced a 25-basis-point (0.25%) rate hike. This marked a downshift in the pace of rate hikes, with the previous six hikes being 0.5% or larger. 

3.    The busiest week of quarterly earnings reports- companies representing roughly a third of the S&P 500’s market capitalization released results. The social media giant Meta platforms(Facebook’s parent co.) beat revenue expectations for the fourth quarter on Thursday, however, Apple, Google’s parent company Alphabet, and Amazon.com followed by providing disappointing results and outlooks on Friday.

SPX sectors in play

Eight out of 11 sectors within the SPX index closed positive for the week. Growth stocks outperformed value, Communication Services(XLC) and Tech(XLK) stocks led the gains while the typical defensive Utilities(XLU) and Energy(XLE) stocks lagged.

Meta stock price surged. A 23% jump on Thursday in Facebook’s parent company, Meta Platforms—the stock’s biggest daily gain in almost a decade—provided a major boost to the technology-heavy Nasdaq Composite Index and other mega-cap technology and internet-related growth stocks. Some of the enthusiasm drained on Friday, however, following disappointing results and outlooks from Apple, Google’s parent company Alphabet, and Amazon.com. Refer to below SPX sector indexes weekly performance table.  

Indexes technical levels

Major indexes were up another week – its fourth in the first five weeks of 2023. DJI index still been trapped (sideway consolidation) within its five-week trading range, Nasdaq has been leading the way up this year, closed above its 250dma for the first time since one year ago.

On Thursday, the S&P 500 marked its first “golden cross” in two-and-a-half years, as the index’s 50-day moving average drifted slightly above its 200-day average. The metric is used by technical analysts as an indicator that an upward trend in the markets is gaining momentum. Heavy “short covering,” or the buying of stocks by hedge funds and others to cover their bets that the stock’s price will fall, also appeared to be at work.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Chinese equities fell in the first full week of trading after the weeklong Lunar New Year holiday as investors pocketed gains from a four-week rally streak and turned cautious about the strength of the country’s recovery. The broader capitalization-weighted Shanghai Composite Index(SSE) eased 0.04% and the blue chip CSI 300 Index slipped 0.95%. In Hong Kong, the benchmark Hang Seng Index(.HSI) retreated 4.5%, its biggest weekly decline since the end of October, according to Reuters.

Key highlights for the week and outlook for China/HK:

1.    China’s official manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 in January from December’s 47.0. This marked a return to growth for the first time since September as domestic activity improved after Beijing abandoned its coronavirus restrictions at year-end. The nonmanufacturing PMI rose to a better-than-expected 54.4 from 41.6, reaching its highest reading since June. 

2.    IMF raised its annual growth forecast for China as the economy rebounds following the removal of pandemic curbs. The IMF projected that China’s economy would grow 5.2% this year, up from its October forecast of 4.4%, and kept its estimate for 2024 at 4.5%.

Technically, both SSE and Hang Seng Indexes appear over bought after recent rally, expected short-term profit-taking or sideway consolidation.

SSE weekly chart

.HSI weekly chart

Singapore

STI index fell 9.92points or 0.29%, after it had a very bullish breakout the previous week from long term sideway consolidation, probably by profit-taking. No doubts bulls are in absolute charge and we are looking for further upside move. Next level to watch is previous high 3466 in Mar 2022.

STI weekly chart

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