Stocks Mixed Amid Turmoil in Banking Sector

Weekly Wrap Content for the week of Mar 17:

1. Week 11 major indexes performance;

2. Week 11 US sector indexes performance;

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

U.S.

For the week ended Mar 17, 2023, major U.S indexes closed mixed for the week. Pressures on the banking sector were front and center, with headlines taking markets on a roller-coaster ride. Concerns emerged after the failures of Silicon Valley Bank (SVB) and Signature Bank, which then spread to First Republic Bank and Credit Suisse.

This one-two punch involving U.S. regional banks and a large international bank briefly erased the S&P 500’s gains for the year. Worries that a steeper slowdown in the economy would follow, and hopes that the Federal Reserve would now be forced to moderate or even pause in its rate-hiking cycle. Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Worries persist around the banking system. After Sillicon Valley Bank(SVB)’s failure. The Fed, the Federal Deposit Insurance Corporation (FDIC), and the Treasury Department announced that all SVB depositors would have full access to funds, while the Fed made additional funding available to banks to safeguard deposits and prepared to address any potential liquidity pressures.

Investors wonder if First Republic will be next. News on Wednesday that European banking giant Credit Suisse (CS) was also experiencing problems sent markets sharply lower again, latest news from Financial Times on Sunday said UBS offers to buy Credit Suisse for up to $1bn. 

2.    Rates expected to be ended lower. By the end of the week, futures markets were pricing in zero likelihood of a 50-basis-point hike compared with a 40% chance of one the week before, according to CME Group data. Markets were also placing a roughly 39% chance on the Fed keeping rates steady at its upcoming meeting on March 21–22 and a nearly 99% probability that the federal funds target rate would end the year lower than its current range of 4.50% to 4.75%. 

3.    CPI in Feb reported in line with expectation to 6.0% yoy, its slowest pace since Sep 2021, it was overshadowed by the turmoil in the banking sector. The CPI and recent jobs data would call for more hikes, but the stress in the banking sector calls for a potential pause.

SPX sectors in play

Seven out of 11 sectors within the SPX index closed positive for the week. Financials(XLF) and Communication Services(XLC) stocks recording strong gains, while financials(XLF) and energy(XLE) shares suffered significant losses. The mega-cap tech shares that generate significant free cash flow and have minimal exposure to the regional banks performed especially well, and large-cap growth stocks outperformed their value counterparts. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Dow which dominated mostly by value stocks closed down for 2^nd week, lost 0.15% for the week, while Nasdaq and SPX each gained 4.41% and 1.43% respectively (refer to the above indexes weekly performance table). SPX and Dow both still below their major moving averages (20, 50 and 200dma) while Nasdaq rebounded above all three MAs. Technical evidence to show growth outperforming value stocks. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks ended a volatile week on a mixed note as global banking woes offset optimism about an economic recovery and further monetary support from Beijing. The Shanghai Stock Exchange Index(SSE) added 0.63%, and the blue-chip CSI 300 Index fell 0.21% in local currency terms. In Hong Kong, the benchmark Hang Seng Index(.HSI) added 1.03%.

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

1.    The People’s Bank of China (PBOC) said it will cut the reserve requirement ratio (RRR) for most banks by 25 basis points for the first time this year in a bid to ensure liquidity and boost the economy. The moves follow PBOC Governor Yi Gang’s surprise reappointment for another term after he was widely expected to retire. 

2.    China new home prices rise at fastest pace in years. New home prices in 70 of China's largest cities rose 0.3% in February, above the 0.1% gain in January and marking the fastest increase since July 2021, according to the National Bureau of Statistics. 

3.    New bank loans reached a higher-than-expected RMB 1.81 trillion in February compared with January’s record RMB 4.9 trillion.

Technically, Hang Seng Index (. HSI) closed just below all its major moving averages (20, 50 and 200MAs) which shows market still weak. While SSE index closed just above 50dma and well above 200dma. The index has been in sideway consolidation mode for more than seven weeks.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index closed up 5.85points or 0.18% to 3183.28 for the week, its first weekly gain after six weeks of consecutive down.

Technically, STI got a spike down and tested 3100 support level on Tuesday (14 Mar) before rebounding and recovered all its losses earlier in the week. STI closed below all its major moving averages 20, 50 and 200DMAs now, momentum turns sour a bit, immediate upside resistance at 3200-3211 gap area, also just beneath its 200dma level of 3215, a quite strong resistance level to watch in coming week(s). Immediate downside support at recent low around 3100 level.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.