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.