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