Stocks Up Led by Techs and Debt-Ceiling Optimism

Weekly Wrap Content for the week of May 26:

1. Week 21 major indexes performance;

2. Week 21 US sector indexes performance;

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

U.S.

For the week ended May 26, 2023, major U.S indexes ended the week broadly higher, thanks to growing optimism about a debt-ceiling deal and a string of strong earnings reports from microchip makers that delivered a fifth straight weekly gain for the Nasdaq Composite, leaving it at a nine-month high. The technology-heavy Nasdaq Composite outperformed and ended the week up 23.97% for the year-to-date period—a stark contrast to the 0.16% decline of the narrowly focused Dow Jones Industrial Average over the period. Markets were scheduled to be closed on Monday, May 29, in observance of Memorial Day. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Debt-ceiling negotiations resumed after President Joe Biden returned from Japan at the start of the week. Stocks rallied on Friday as the Wall Street Journal reported that the two sides were nearing a two-year spending deal that also extended the debt ceiling over the same period. Latest update on Sat May 27 that a tentative deal reached to avoid U.S default. 

2.    Inflation remains stubbornly high. The core personal expenditures (PCE) price index, considered the Federal Reserve’s preferred inflation gauge, rose by 0.4% in April, a tick above expectations. The signs of a resilient consumer and persistent inflation pressures led to a jump in short-term U.S. Treasury yields. 

3.    The emerging of artificial intelligence(AI) space-sparked by ChatGPT/Google Bard. The signal event in the week may have been Thursday’s 24% jump in the shares in chipmaker NVIDIA, which took the company’s market capitalization to roughly USD 963 billion by the end of the week and made it the sixth most highly valued public company in the world. Shares rose after the company beat consensus first-quarter earnings expectations by a wide margin and raised its profit outlook.

SPX sectors in play

Three out of 11 sectors within the SPX index closed positive for the week. Technology(XLK), Communication Services(XLC) and Consumer Discretionary(XLY) outperformed for 2^nd week in a row, led by solid result from microchip company Nvidia(NVDA). While the typical defensive stocks Consumer Staplers(XLP) lagged. Technology and communication services are now up over 30% this year already, well into bull-market territory. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Nasdaq Composite Index closed a fifth straight weekly gain, hit nine-month high for the week. SPX also closed 2^nd weekly higher. Dow index was down 1% instead. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks fell after a batch of disappointing indicators in recent weeks pointed to a flagging economic recovery. The Shanghai Stock Exchange Index fell 2.16% while the blue chip CSI 300 fell 2.37%. In Hong Kong, the benchmark Hang Seng Index(.HSI) fell 3.62% below the psychologically key 19,000-point level to its lowest close since December in a holiday-shortened trading week.

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

1.    No major indicators or policy measures were released in China during the week. But mounting evidence that the country’s post-pandemic recovery is losing momentum has raised concerns about the economic outlook. 

2.    The Chinese banks kept their one- and five-year loan prime rates steady for the ninth straight month, as expected, after the People’s Bank of China (PBOC) left its one-year policy loan rate unchanged earlier in May. However, speculation is growing that the central bank will ease policy to shore up the economy.

Technically, Hang Seng Index (. HSI) tumbled and fell below 19k level this week, sentiment is very weak. While SSE index also fell to just above 200dma level at around 3200.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index appears stabilised at around 3200 level after previous four-week down. Immediate downside support to watch is at 3168-its recent low. It facing multiple upside resistance level at around 3230-3250.

STI weekly chart

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

Debt Ceiling Negotiations Hopeful, Stocks Up

 Weekly Wrap Content for the week of May 19:

1. Week 20 major indexes performance;

2. Week 20 US sector indexes performance;

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

U.S.

For the week ended May 19, 2023, major U.S indexes recorded solid gains for the week, with the S&P 500 Index breaching the 4,200 level in intraday trading for the first time since late August. The catalyst for the week’s gains appeared to be a notable shift in tone around debt ceiling negotiations. Following a Wednesday meeting at the White House, President Joe Biden stated he was confident there will be no default. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Retail sales in April reported to rise 0.4%, below consensus expectations and at the slowest year-over-year pace (1.6%) since early in the pandemic. 

2.    Labour market still resilient. Weekly jobless claims came in at 242k, below expectations and below the previous week’s reading of 264k, the highest level since late 2021. 

3.    Rate hikes. Federal Reserve Chairman Jerome Powell said the country’s recent bank troubles could mean interest rates might not have to rise as much as previously thought.

SPX sectors in play

Seven out of 11 sectors within the SPX index closed positive for the week. Technology(XLK), Communication Services(XLC) and Consumer Discretionary(XLY) outperformed, led by the several mega-cap technology-related stocks, particularly a strong gain in the shares of Google parent Alphabet and Facebook parent Meta Platforms. While the typical defensive stocks such as Utilities(XLU) and Consumer Staplers(XLP) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Nasdaq Composite Index had a firm bullish breakout this week, hit new high since last Aug, let by several mega-cap tech stocks. SPX also closed at its highest level marginally since Aug. Dow index still trapped within its 7-week sideway consolidation range. All three indexes appear with bullish bias. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks ended mixed amid concerns that the country’s post-COVID recovery is losing steam. The Shanghai Stock Exchange Index rose 0.34% while the blue chip CSI 300 added 0.17%. In Hong Kong, the benchmark Hang Seng Index(.HSI) gained 0.90%.

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

1.    Official data showed industrial output, retail sales, and fixed asset investment grew at a weaker-than-expected pace in April from a year earlier. Unemployment fell to 5.2% in April from March’s 5.3%, but youth unemployment jumped to a record 20.4%, raising concerns that the post-pandemic recovery is not strong enough to attract new talent. 

2.    The People’s Bank of China (PBOC) injected RMB 125 billion into the banking system via its one-year medium-term lending facility compared with RMB 100 billion in maturing loans.

Technically, Hang Seng Index (. HSI) has been drifting lower to its two-month low also its sideway range bottom, no strength. While SSE closed just below its 20dma and 50dma.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index rebounded on Friday but still closed fell 4^th week in a row, below all major moving averages. Market appears weak. Immediate downside support to watch is at 3186-its 61.8% Fibonacci retracement level. It dipped below it this week but rebounded above it on Friday.

STI weekly chart

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

Rate Hikes Likely End, Impacts Begin

Weekly Wrap Content for the week of May 5:

1. Week 18 major indexes performance;

2. Week 18 US sector indexes performance;

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

U.S.

For the week ended May 5, 2023, major U.S indexes end mixed despite a rally on Friday. The SPX ended week lower on comments from Fed Chair Powell that suggested a pivot to cutting rates might not occur as quickly as the market had hoped. Uneasiness surrounding the need to raise the U.S debt ceiling may also have weighed on sentiment. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Fed rate hike probably the last one. On Wednesday May 3, the Federal Reserve implemented what perhaps could be the last interest-rate increase of this hiking cycle. The Fed raised rates by 0.25%, its 10th consecutive rate hike since March 2022, bringing the fed funds rate to 5.0% - 5.25%. 

2.    Ongoing turmoil in the banking system. After First Republic Bank was acquired by J.P. Morgan last weekend, this week additional West Coast-based regional banks, including PacWest Bancorp, Western Alliance, and Zions Bank, all saw substantial declines in their share prices, before rebounding somewhat on Friday. Consequently, both credit and regulation on regional banks will likely to tighten. 

3.    Still strong April job report despite higher rates and uncertainty in the banking system. April nonfarm payroll jobs increased by 253k, far higher than estimated of 185k. unemployment rate came in at a healthy 3.4%, still near multidecade lows. 

SPX sectors in play

Only three out of 11 sectors within the SPX index closed positive for the week. Technology(XLK) and Healthcare(XLV) outperformed, led by the market heavyweight Apple(AAPL) which reporting expectations-beat results. While Communication Services(XLC) and Energy(XLE) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Despite strong rebound on Friday, the SPX and Dow indexes still down for the week. While Nasdaq Composite Index recovered all its losses and closed inched higher. All three indexes have been in sideway consolidation mode for the last three-six weeks with bullish bias. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks ended mixed after a holiday-shortened week as surprisingly weak manufacturing data tempered sentiment. The Shanghai Stock Exchange Index rose 0.34% while the blue chip CSI 300 fell 0.3%. In Hong Kong, the benchmark Hang Seng Index(.HSI) gained 0.78%. Financial markets in mainland China were closed Monday through Wednesday for the Labor Day holiday.

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

1.    China’s official manufacturing purchasing managers’ index (PMI) fell to 49.2 in April from March’s 51.9, marking a return to contraction for the first time since December after Beijing abandoned its zero-COVID policy. The nonmanufacturing PMI also softened in April but remained above 50, the level separating growth from contraction. 

2.    Domestic tourism during the five-day holiday rebounded to pre-pandemic levels. Approximately 274 million trips were taken from Saturday through Wednesday, marking a roughly 71% increase from a year earlier, according to the Ministry of Culture and Tourism.

Technically, Hang Seng Index (. HSI) rebounded 1^st week after a two-week decline. The index closed just above its 50dma level still trapped in its three month sideway range. While SSE appears more bullish as it rebounded to close above 20 and 50dma after fell below of them previous week.  

SSE weekly chart

.HSI weekly chart

Singapore

The STI index fell 2^nd week in a row, closed just above its 50dma, the overall market is relatively quiet with decreasing total volume as it enters month of May. Immediate downside support to watch would be at its 50dma around 3255 and upside resistance around 3330.

STI weekly chart

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