Stocks Up on Slowing Inflation, Tech Earnings

 Weekly Wrap Content for the week of Jul 28:

1. Week 30 major indexes performance;

2. Week 30 US sector indexes performance;

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

U.S.

- Three major macro trends recently:

1)    The Fed and other global central banks may be nearing an end to rate-hikes;

2)    Inflation continues to gradually moderate;

3)    Economic growth remains resilient.

- Stocks ended higher over a week notable for the Dow Jones Industrial Average’s notching its 13th consecutive daily gain on Wednesday, which marked its longest winning streak since 1987. Fed meeting and some high-profile corporate earnings reports were the headlines of the week. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Fed rates hike. As expected, the Fed raised interest rates by 0.25% at its July FOMC meeting, bringing the fed funds rate to 5.25% to 5.5%. Was this the last rate hike from the Federal Reserve? They may not admit it, but it very well could be. Rate cuts are still unlikely this year. 

2.    Inflation check. Stocks opened sharply higher on Friday, following news that the Fed’s preferred inflation gauge, the core (less food and energy) personal consumption expenditures (PCE) price index had risen 0.2% in June, down from 0.3% in May, making for a year-over-year increase of 4.1%, a tick lower than expectations and the slowest increase since September 2021. Headline CPI inflation has come down year over year from 9.1% in June 2022 to 3.0% in this past June. Nonetheless, core inflation remains elevated at 4.8%, as services demand remains robust and wage growth has yet to meaningfully ease. 

3.    Upbeat U.S GDP data. Q2 GDP annualised growth surprised to the upside this week, came in at 2.4%, well above estimates of 1.8%, and accelerated from last quarter’s 2% growth rate. 

4.    Strong earnings reports from chip companies Intel (INTC) and KLA (KLAC) triggered a broad rally in some of the big-name tech companies that have contributed so much to the benchmark indexes' healthy performance this year. Alphabet (GOOGL) was up 2.7%, Amazon (AMZN) gained more than 3%, Meta Platforms (Meta) jumped more than 4%, Microsoft (MSFT) was up nearly 2.5%, and Tesla (TSLA) rose more than 4%.

SPX sectors in play

Seven out of 11 sectors within the SPX index closed with gains for the week. Growth stocks handily outpaced their value counterparts, and the gains were led by the technology-heavy Nasdaq Composite. Communication Services (XLC), Energy (XLE) and Consumer Discretionary (XLY) were among top gainers while Health Care (XLV) and Utilities (XLU) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Technically, Dow notching its 13th consecutive daily gain on Wednesday, which marked its longest winning streak since 1987. Dow currently trading at resistance level around 35,500 level. The Nasdaq (COMP) facing resistance at around 14,500 level after recent strong rally. The barometer index SPX also facing resistance level at around 4640 after recent rally. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks rallied after Beijing signaled it will provide more stimulus to support the economy. The Shanghai Stock Exchange Index(SSE) gained 3.42%, while the blue chip CSI 300 soared 4.47%. In Hong Kong, the benchmark Hang Seng Index(.HSI) rose 4.41% ( refer to the above weekly performance table).  

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

1.    China’s top decision-making body led by President Xi Jinping, pledged to provide stimulus to boost domestic consumption amid a flagging recovery after the end of pandemic lockdowns in December. Officials also vowed to enhance support for the ailing real estate sector following the Politburo’s latest meeting, during which leaders set economic policy for the rest of 2023. 

2.    Economists lowered their growth forecasts for China as it continues to grapple with weak demand. China’s gross domestic product is projected to expand 5.2% this year, down from previous estimates of 5.5%, while growth for 2024 is forecast to expand 4.8%, according to economists surveyed by Bloomberg.

Technically, SSE Index rebounded back to its seven-week high after hitting low since the beginning of the year. Hang Seng index also rebounded to close at its six-week high, broke up its trend line drawn from highs in Jan and Jun 2023. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

Singapore stocks charged higher for 4th day in a row on Friday. The STI index rallied over 100points or more than 3% in last four days, bring STI’s weekly return to 2.83% in this week to multi months high since Feb 2023. The index recorded its 3rd weekly gain with a marvelous of 7.5% up in three weeks, bring STI’s year-to-date return to 3.7%.

Technically, STI index has had a handsome extend rally over past three weeks and reaching its major downtrend line resistance by connecting its highs of Mar 2022 and Jan 2023. Immediate technical resistance at around 3400 level in coming week(s), there are probably short term profit-taking pressure going forward. Downside technical support to watch is at around 3325 level, should there any pull back.

STI weekly chart

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

Stocks Mostly Higher Begining of Earnings Season

Weekly Wrap Content for the week of Jul 21:

1. Week 29 major indexes performance;

2. Week 29 US sector indexes performance;

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

U.S.

Key Takeaways:

- For the week ended Jul 21, 2023, most of the major U.S. equity indexes advanced on hopes that the tight labor market and moderating inflation would help the economy avoid a hard landing.

- The tech-heavy Nasdaq Composite(COMP), however, suffered a modest pullback. The S&P 500 within 6% of the all-time high, after impressive gain it has had so far this year.

- Stocks have rallied sharply off of the October bear-market low, recouping the majority of the 26% decline between January and October of last year.

- The latest batch of corporate earnings announcements offered an additional boost. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Initial jobless claims decline. With initial claims reaching their lowest level since May. Labour market remains in great shape by historical standards, there are early signals that some softness is emerging. Initial jobless claims are one of the credible leading indicators among analysts. The three-week moving average in weekly initial jobless claims is up nearly 20% over the last six months. 

2.    Earnings remained squarely in focus. About 79% of S&P 500 companies that have reported earnings thus far have topped earnings per share forecasts. Still, we're not even one-fifth of the way through earnings season. 

3.    Fed rate hikes. Analysts expect the Fed to hike by another quarter point (0.25%) at its meeting on July 26 and hold its policy rate steady over the course of the year. 

4.    Yield curve (10y treasury yield - 2 year treasury yield) remains deeply inverted, in fact, the most inverted it's been in more than 40 years.

SPX sectors in play

Seven of 11 sectors within the SPX index closed with gains for the week. Value stocks outperformed their growth counterparts. Health Care(XLV) and Financials(XLF) are among top gainers, while Communication Services(XLC) and Consumer Discretionary(XLY) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Technically, Dow rose for the 10th consecutive session Friday, and the SPX ended with a modest weekly advance. The Nasdaq (COMP) posted a small weekly drop. The SPX now within 6% of the all-time high. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks retreated as the latest economic data pointed to faltering growth.  The Shanghai Stock Exchange Index(SSE) tumbled 2.16%, while the blue chip CSI 300 declined 1.98%. In Hong Kong, the benchmark Hang Seng Index(.HSI) fell 1.74% ( refer to the above weekly performance table).  

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

1.    On a year-over-year basis, China’s gross domestic product expanded 6.3% in the second quarter—below expectations but faster than the 4.5% growth rate recorded in the first quarter. On a quarterly basis, the economy grew 0.8%, down from the first quarter’s 2.2% expansion. 

2.    The government pledged to improve conditions for private businesses to boost corporate confidence amid the faltering recovery, according to a statement released Wednesday. Separately, Chinese authorities unveiled an 11-point consumption plan to boost household spending.

Technically, both .HSI and SSE index are trading under their major moving averages- facing downside selling pressure. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index recorded 2^nd weekly gains in a row, has since fully recovered its losses and closed highest since May 2023, though the index remains largely in its consolidation range this year. It recorded moderate ytd gain of 0.83%.

STI weekly chart

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

Stocks rise on cooling inflation signals

Weekly Wrap Content for the week of Jul 14:

1. Week 28 major indexes performance;

2. Week 28 US sector indexes performance;

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

U.S.

For the week ended Jul 14, 2023, major indexes all rallied, as investors welcomed data showing a continued cooldown in inflation. The S&P 500 Index ended the week 6.50% below the all-time intraday high it established in early 2022. The Nasdaq Composite recorded an even stronger gain but remained 12.94% below its record peak. Both stocks and bonds jumped as investors cheered the sharp deceleration in inflation (both in the consumer and producer prices), which provides some breathing room for the Fed.

Friday also saw the unofficial start of earnings season, as bank giants Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo reported second-quarter results. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Headline inflation for June came in at 3%, cooler than expected, and sharply lower from the previous month's 4% reading. At 3%, CPI is now just one-third of where it peaked a year ago. Inflation is slowing across a growing number of categories, lessening the pressure on the Fed to keep hiking. Exactly one year from the inflation peak, the headline consumer price index (CPI) has been cut by more than two-thirds, solidifying disinflation as the key theme for the economy and the markets this year.   

2.    Earnings season in the spotlight. Beyond inflation and the Fed, investors' attention will turn to corporate profits, as U.S. banks kicked off the second-quarter earnings season on Friday. Since equity markets bottomed nine months ago, the 25% rally in the S&P 500 has been exclusively driven by valuation expansion. But with the benefit of rising valuations likely mostly behind us, earnings will now have to do the heavy lifting to drive gains in the back half of the year.

SPX sectors in play

All of 11 sectors within the SPX index closed with gains for the week. Growth stocks were among the top performers, Consumer Discretionary( XLY), Communication Services(XLC) and Technology(XLK) stocks led the rally. Energy(XLE) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All three major indexes closed at new highs in multiple months. Technically, Dow was trying to close out of its sideway consolidation, SPX and Nasdaq both are still in up trending. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks rallied after Beijing telegraphed measures to support the country’s flagging economy. The Shanghai Stock Exchange Index(SSE) rose 1.29%, while the blue chip CSI 300 added 1.92%. In Hong Kong, the benchmark Hang Seng Index(.HSI) was the top gainer with 5.71% up( See above weekly performance table).  

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

1.    Chinese officials  announced an extension to two of the 16-point stimulus guidelines rolled out last November to support the ailing property sector. The extended policies aim to defer property development loans and encourage financial institutions to ensure the delivery of projects and will be in effect until the end of 2024. 

2.    China’s financial regulators imposed a fine of more than USD 1 billion on technology giants Ant Group and Tencent Holdings. The penalty was widely interpreted as an end to more than two years of probes into China’s biggest internet companies and a broader tech sector crackdown that spurred investor concerns about Beijing’s shifting approach to private enterprise. 

3.    China’s CPI remained unchanged in June from a year earlier and marked the weakest reading since February 2021.

Technically, both .HSI and SSE index still stuck in its consolidation range since mid-May. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index rallied and gained 3.48% this week, recovered nearly all of its past weeks losses and closed near its sideway consolidation top.

STI weekly chart

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

Stocks Slip After Jobs Data

Weekly Wrap Content for the week of Jul 7:

1. Week 27 major indexes performance;

2. Week 27 US sector indexes performance;

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

U.S.

For the week ended Jul 7, 2023, major indexes closed lower in a generally quiet week. The key driver for this market disruption was stronger-than-expected labor market and services data, which drove bond yields higher and increased expectations for the fed funds rate to remain higher for longer. Investors also awaiting the release of Q2 earnings reports. While small-cap stocks underperformed large-cap equities. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Mixed signals from job market. Two key jobs reports released in the week for the month of June – ADP and nonfarm patrols - both of which continue to remain resilient and support household consumption. First, the ADP private payrolls report for the month of June came in well above expectations, adding 497k jobs versus forecasts for 225k. Second, the June nonfarm payrolls report. Total nonfarm jobs added in June were 209k, below expectations of 230k and well below last month's 306k (which were also revised lower). 

2.    Fed interest rates expected to be kept higher for longer. It’s expected the Fed to raise rates once more at the July meeting, bring the fed funds rate to 5.25%-5.5%, and keep them here until May 2024.

SPX sectors in play

10 out of 11 sectors within the SPX index closed lower for the week. Healthcare(XLV) and Technology(XLK) stocks were among the worst performers. Disappointing trial results for AstraZeneca’s new lung cancer drug weighed on the health care sector. The small Real Estate sector(XLRE) was the only sector closed positive. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Among the three major indexes. Dow gave back all its previous week’s gain and ended nearly 2% down. SPX and Nasdaq both failed on its rebound on Friday, closed lower and ended with weekly loss of 1.16% and 0.92%. Technically, Dow has been stuck in its sideway consolidation, SPX and Nasdaq both are still in up trending. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks retreated as the latest economic data raised concerns about the country’s sputtering post-pandemic recovery. The Shanghai Stock Exchange Index(SSE) fell 0.17%, while the blue chip CSI 300 lost 0.44%. In Hong Kong, the benchmark Hang Seng Index(.HSI) plunged 2.91%.  

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

1.    The private Caixin/S&P Global survey of manufacturing activity eased to 50.5 in June from May’s 50.9 as expansion of manufacturing output and new orders softened. The Caixin survey of services activity fell to a lower-than-expected 53.9 in June from 57.1 in May, its sixth successive monthly expansion but lowest reading since January. 

2.     Premier Li Qiang, the country’s second-highest ranking official, pledged to "spare no time" in implementing a batch of targeted policies to strengthen China’s post-pandemic recovery. Li stated that China is at a critical stage of economic recovery and industrial upgrading and that comprehensive, well-coordinated measures are necessary to stabilize growth and employment, Bloomberg reported, citing state-run media. However, Li did not offer details on any specific measures.

Technically, the SSE index has been trading directionless for the past two months, no strength for any meaningful rebound. Hang Seng Index (. HSI) underperformed and continued trading lower towards its six weeks’ low at just above 18,000 level. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index plunged 2.07% this week, dropped to its lowest since Mar 20 this year. Led by the three local banks.

STI weekly chart

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

First Half Check for Stocks

Weekly Wrap Content for the week of June 30:

1. Week 26 major indexes performance;

2. Week 26 US sector indexes performance;

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

U.S.

For the week ended June 30, 2023, positive growth and inflation surprises helped the major benchmarks round out a solid quarter on a high note, with the S&P 500(SPX) Index recording its best weekly gain since the end of March. The SPX ended on its highest close in more than 14 months and the Nasdaq Composite (COMP) gained nearly 32%-- its strongest first-half performance in four decades (since 1983). The rally also broadened, with small-caps and value shares outperforming, the small-cap index Russell 2000 outperformed with 3.68% weekly gains. Refer to major indexes’ weekly and YTD performance table below.

Monthly index performance for June:

Key highlights for the week and outlook:

1.    Inflation data released Friday appeared to provide the biggest boost to sentiment. Personal consumption expenditures (PCE) price index had increased by 0.1% in May, bringing its year-over-year increase down to 3.8%, its lowest level since April 2021. The core (excluding food and energy) PCE index, considered the Federal Reserve’s preferred inflation gauge, fell back to 4.6% on a year-over-year basis, still well above the Fed’s 2% target, but seemingly calmed fears of a reacceleration in price pressures after April’s upside surprise. 

2.    Apple(AAPL) closed trading Friday with a market capitalization above USD 3 trillion, marking a first for a publicly traded company. The Wall Street Journal reported that Apple’s valuation has surpassed that of five of the S&P 500’s 11 sectors in their entirety (materials, real estate, utilities, energy, and consumer staples). 

3.    Nvidia (NVDA) rose nearly 4% after a Daiwa analyst upgraded the company's shares to "outperform" from "neutral" and boosted his price target to $475 from $408, citing Nvidia's "commanding" position in generative artificial intelligence. Nvidia shares ended around $423, nearly triple where they were at the end of 2022. 

4.    Strong starts are a good sign. The 16% return for the S&P 500 in the first half of 2023 is the fifth-best start since 1990. In those four better instances, the market recorded an average return for the full year of 33%. Based on data from Bloomberg.

SPX sectors in play

All 11 sectors within the SPX index closed positive for the week. Energy(XLE) and Tech(XLK) outperformed, led by Apple(AAPL) and Nvidia(NVDA). While the typical defensive Consumer Staplers(XLP) and Health Care(XLV) lagged. Refer to below SPX sectors ETF weekly performance table.

For the first half of this year, tech sector outperformance has been a key theme so far this year, but the leadership within the sector has been concentrated in a few of the mega-cap names. Apple (whose market cap reached $3 trillion last week), Microsoft, Tesla, Amazon, Alphabet (Google), NVIDIA, and Meta gained an average of roughly 85% in the first six months of this year. This means the breadth of the market's gains has been fairly narrow, as demonstrated by the 16% year-to-date(YTD) gain in the S&P 500 and 7% for the small-cap index Russell 2000.

Indexes technical levels

All three major indexes i.e Dow, SPX and COMP closed on their highs. Dow rebounded to near its multi-months’ high which is technical resistance around 34,400 level, where both SPX and COMP weekly candles very bullish, further upside move expected. to below indexes weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks ended mixed, as weak economic indicators offset optimism that the government might implement additional measures to bolster economic growth. The Shanghai Stock Exchange Index(SSE) gained 0.14%, but the blue chip CSI 300 lost 0.56%. 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 inched up 0.14%.

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

1.    China’s official manufacturing Purchasing Managers’ Index (PMI) ticked up to 49.0 in June—in line with expectations and an improvement from the 48.8 registered in May. Nevertheless, PMI readings less than 50 indicate a contraction in activity.

2.     Premier Li Qiang, the country’s second-ranking official, asserted that China is on track to reach its annual growth target of about 5%. Speaking at the World Economic Forum’s annual meeting, Li pledged that Beijing would roll out more practical and effective measures to strengthen domestic demand, boost markets, and support the country’s development and growth.

Technically, the SSE index fell back to its level around Jan 9 this year given back nearly all its YTD gains. Hang Seng Index (. HSI) underperformed as it lost 4.37% for the first half and closed just beneath 19,000 support level. It appears weak on its weekly chart.

SSE weekly chart

.HSI weekly chart

Singapore

For the first half of this year, The STI index lost 1.4%, the index has been largely trading in sideway consolidation mode for the past seven weeks, following the three local banks which are the major part of this index.

STI weekly chart

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