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