April Ends on High Note Helped by Upbeat Earnings Reports

 Weekly Wrap Content for the week of Apr 28:

1. Week 17 major indexes performance;

2. Week 17 US sector indexes performance;

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

U.S.

For the week ended 28 Apr, 2023, major U.S indexes end the month on a high note helped by a string of strong earnings reports. SPX, Dow and tech-focused Nasdaq all notching their second-straight day of gains on Friday. 35% of SPX companies, which together represent 44% of its market capitalization, were scheduled to release results during the week. On Thursday, gains in just four stocks—Microsoft, Apple, Amazon.com, and Facebook parent Meta Platforms—accounted for nearly half of the S&P 500’s strong gain (the biggest since January 6), after Meta jumped 14% on an earnings beat. Refer to major indexes’ weekly and YTD performance table below.

Markets have logged a healthy rally so far this year, including the following year-to-date: The S&P 500 is up 8%. The Nasdaq has seen the strongest momentum, up 16%, as technology and growth stocks have rallied on the back of lower rates. Refer to below table for major indexes performance in April.

Sell in May and Go Away?

The old market adage "sell in May and go away" may have a ring to it, but is it actually valid advice? Unsurprisingly, the answer is no.

Over the last 40 years, the average return for the stock market from May to August was a respectable 3.2%, hardly a period worth missing. The market was higher in 75% of those summer periods, with the best May through August gains coming in 1987 (+16%), 2009 (+18%) and 2020 (+21%). The worst periods were in 1998 (-14%), 2002 (-14%) and 2010 (-11%).

Key highlights for the week and outlook:

1.    Q1 GDP report confirmed that the U.S economy is losing momentum, with GDP slowing to 1.1% in the first quarter, compared with 2.6% in the prior quarter and 3.2% in the quarter before that. Although the GDP report signals the economy is softening, consumers continue to show resiliency, with household spending (the lion's share of the economy) increasing at a healthy 3.7% rate last quarter, a notable acceleration from the previous period and well above the average of 1.7% over the prior four quarters. 

2.    Inflation date, the personal-consumption expenditures (PCE) price index—the Fed's preferred inflation gauge—slowed to 4.2% in March from a year earlier. That's slower than the previous month's 5.1% gain, but still more than double the Fed's 2% target. 

3.    Corporate earnings announcements were in the spotlight, with markets getting a boost from better-than-feared results. With roughly half of S&P 500 companies having reported quarterly results, earnings for the period are down 1.7%, while revenues are up 4% versus the same quarter a year ago. 

4.    Renewed banking stresses heightened fears of a slowdown and possible recession. First Republic Bank’s earnings release revealed that the bank had suffered more than USD 100 billion in deposit outflows in the first quarter. First Republic’s stock fell further on Friday after CNBC reported that the Federal Deposit Insurance Corporation was planning on taking the bank into receivership that evening.  

SPX sectors in play

Six out of 11 sectors within the SPX index closed positive for the week. Mega-caps outperformed cyclicals and small-caps, led by Communication Services(XLC) and Technology(XLK) stocks, while Industrials(XLI) and Utilities(XLU) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three indexes closed up for the week. DJI closed at best level since Jan 9, SPX and Nasdaq both closed at their respective best level since last Aug. All three indexes appear technical bullish. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks mixed ahead of a five-day holiday as Beijing reaffirmed its supportive policy stance, assuaging concerns about an uneven economic recovery. The Shanghai Stock Exchange Index rose 0.67% while the blue chip CSI 300 fell 0.09%. In Hong Kong, the benchmark Hang Seng Index(.HSI) lost 0.9%. China’s stock markets are closed Monday through Wednesday for the Labor Day holiday and will resume trading on Thursday, May 4.

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

1.    China’s Politburo, the country’s top decision-making body, vowed to continue its “forceful” fiscal and monetary policy stance to support the economy as it faces obstacles in economic transformation and insufficient domestic demand, state media reported following a meeting of top officials. 

2.    The People’s Bank of China extended its short-term cash injections into the banking system via seven-day reverse repurchase agreements for the 11th straight day on Friday, marking the longest streak this year. The net total injection reached RMB 637 billion for the current cycle as the central bank attempted to ensure ample liquidity at month-end.

Technically, Hang Seng Index (. HSI) fell 2^nd week in a row, stuck between 50dma and 200dma, expected sideway consolidation short term with downside support at 200dma level around 19400. While SSE index rebounded this week and recovered most of its previous loss. SSE index crossed above 20 and 50dma this week which is bullish.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index fell for 1^st week after six weeks up streak, closed between 20 and 50dma. The index has retreated down to its four-week bottom at around 3270 level. Immediate downside support to watch would be at its 50dma around 3258 and upside resistance around 3330.

STI weekly chart

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