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