U.S stocks Down for the Week as Recession Concerns Linger

Weekly Wrap Content for the week of Apr 21:

1. Week 16 major indexes performance;

2. Week 16 US sector indexes performance;

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

U.S.

For the week ended 21 Apr, 2023, major U.S indexes ended lower as investors juggled recession and banking sector concerns against expectations for the remainder of the first-quarter earnings season. Stronger-than-expected manufacturing data reported Friday belied some of the weaker economic numbers reported earlier in the week, contributing to a generally indecisive trading session. Coming week a little over a third of the S&P 500 companies are reporting earnings, which will include many of the big tech heavyweights, such as Amazon, Alphabet, Meta and Microsoft. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    The Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge, fell to its lowest level of 16.77 since late 2021. Despite the long list of investor worries that includes recession, inflation, debt-ceiling and geopolitical concerns, equity-market volatility has remained low. 

2.    Investors expect the Fed to have one final rate hike in May, then pause after rate reaches 5%-5.25% for the remainder of the year. 

3.    Cooling labor market. Thursday’s weekly jobless claims report brought signs of growing weakness in the labor market. 

4.    Manufacturing gauge unexpectedly strong. Flash PMI for March report on Friday was 53.5, topping expectations for a number closer to 52 and an 11-month high. The strong data seemed to suggest the economy is holding up better than some fear.

SPX sectors in play

Six out of 11 sectors within the SPX index closed positive for the week. Consumer Discretionary(XLY) and Consumer Staples(XLP) led gainers, while energy companies(XLE) continued to slump in the wake of this week's sell-off in crude oil prices. Communication Services(XLC) lagged too. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three indexes closed down 0.1% to 0.42% for the week. DJI and SPX both recorded 1^st weekly down after five weeks gain streak, while Nasdaq still trapped within its four-week consolidation range. All three indexes still trading above their major moving averages which are bullish. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks fell as mixed economic data and news that the U.S. may introduce fresh investment curbs against China weighed on sentiment. “Investor sentiment edged down as debate over the sustainability of fundamental recovery continues despite the strong macro data,” said Morgan Stanley analysts, suggesting investors to watch May Golden Week data. The Shanghai Stock Exchange Index declined 1.11% while the blue chip CSI 300 fell 1.45%. In Hong Kong, the benchmark Hang Seng Index(.HSI) lost 1.78%.

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

1.    China’s GDP expanded a better-than-expected 4.5% in the first quarter of 2023 from a year earlier, compared with last year’s growth pace of 3.0%. The data prompted several banks to raise their annual growth forecasts for China as consumption continues to recover. 

2.    Home prices rise at fastest pace in almost two years. China’s new home prices increased for a third consecutive month, rising 0.5% in March after February’s 0.3% gain and marking the fastest increase since June 2021, according to the National Bureau of Statistics. The sector has shown signs of stabilizing this year, bolstered by a government rescue package last November.

Technically, Hang Seng Index (. HSI) fell and close just below its 20 and 50dma but still above 200dma, which suggesting limit downside and expected sideway consolidation short term. While SSE index slumped on Friday, logging the biggest daily decline since last November’s rally driven by optimism over easing of COVID restrictions, as uneven Chinese economic recovery dented investor sentiment. SSE index retreated down to just above its 50dma, uptrend still intact by now.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index surprisingly edged higher and closed positive for 6^th week in a row, against major peers in the above index weekly performance table.

Technically, STI index appears in a zig-zag sideway consolidation for the whole week, no clear direction. Major upside resistance at around previous peak 3408 level, downside support at around recent low 3280 level.

STI weekly chart

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