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.