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.