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.