Stocks Rallied After Debt Deal and Jobs Data

Weekly Wrap Content for the week of June 2:

1. Week 22 major indexes performance;

2. Week 22 US sector indexes performance;

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

U.S.

For the week ended June 2, 2023, major U.S indexes ended with solid gains, with the S&P 500 Index touching its highest intraday level since mid-August 2022. The technology-heavy Nasdaq Composite Index notched its sixth consecutive weekly gain and hit its best level since mid-April 2022. In contrast with the past several weeks, however, the rally was broad-based, with strong gains in both value and growth stocks, as well as small-caps. Refer to major indexes’ weekly and YTD performance table below.

Index monthly performance for May.

Key highlights for the week and outlook:

1.    Investors shrug off debt ceiling agreement. The agreement passed by U.S lawmakers on Thursday seemed to have limited impact on sentiment-perhaps because enough signals had previously emerged that a deal was imminent. Instead, investors appeared to return their attention to economic data. The job openings and closely watched nonfarm payrolls report. 

2.    May nonfarm payrolls report surprised on the upside. There were 339k jobs added, well above consensus expectations for around 190k. But unemployment rate also surprised by rising to 3.7% from 3.4%. Suggesting a more difficult job market. Indicates Fed’s sharp interest rate hikes have eased inflation-boosting factor in the labour market. 

3.    ISM’s Manufacturing PMI data for May showed a seventh straight monthly contraction in factory activity as expected, below expected.

 SPX sectors in play

All 11 sectors within the SPX index closed positive for the week. Consumer Discretionary(XLY) led by AMZN and TSLA outperformed. While the typical defensive stocks Consumer Staplers(XLP) and utilities(XLU) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Nasdaq Composite Index closed on its sixth consecutive weekly gain and its best level since mid-April 2022. SPX also closed at its highest since mid-August 2022. Dow index gained 2%, reversing its four-week down streak. Refer to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks rose after the U.S. Senate passed legislation to suspend the debt ceiling, removing the risk of a destabilizing U.S. default and reviving investors’ risk appetite. The Shanghai Stock Exchange Index gained 0.55%, while the blue chip CSI 300 added 0.28%. In Hong Kong, the benchmark Hang Seng Index(.HSI) rose 1.1% after hitting a six-month low earlier in the week. Hong Kong stocks rallied on Friday with the best day in three months.

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

1.    China’s official manufacturing Purchasing Managers’ Index (PMI) fell to a below-forecast 48.8 in May from April’s 49.2, marking the second consecutive month of contraction and the lowest reading since December 2022. The nonmanufacturing PMI also eased, falling to a weaker-than-expected 54.5 in May from 56.4 in April. Separately, the private Caixin/S&P Global survey of manufacturing activity unexpectedly rose to 50.9 in May from April’s 49.5 as output and new orders rose at the highest level in almost a year. 

2.    Property sector growth loses momentum. New home sales by China’s top 100 developers rose 6.7% in May from a year earlier, down from gains of more than 29% in the previous two months.

Technically, Hang Seng Index (. HSI) rebounded after a three-week consecutive slide to its lowest since end-Nov 2022 this week. It has formed a bullish weekly hammer candlestick, thanks to a strong rally Friday. While SSE index has been sideways just above its 200dma technical support, at a low level since mid-Jan this year.

SSE weekly chart

.HSI weekly chart

Singapore

The STI closed down in the holiday-shortened week to its lowest in 10 weeks, ended at 3166.30. The passing of debt-ceiling legislation and rallied U.S stocks on Friday should provide positive momentum for STI coming week, especially for bargain hunters when the index at its 10-week low level. At least a technical rebound is expected though it facing multiple upside resistance levels, with immediate resistance at around 3230. Downside support at around 3100 Mar low.

STI weekly chart

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