Stocks Mixed on Mixed Signals

Weekly Wrap Content for the week of Aug 25:

1. Week 34 major indexes performance;

2. Week 34 US sector indexes performance;

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

U.S.

For the week of 25 Aug, indexes returns varied as investors seemed to react to mixed signals on the economy and the course of monetary policy. Growth stocks handily outperformed value shares, helped by another substantial earnings and revenue beat by artificial intelligence chipmaker NVIDIA. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Jackson Hole conference on Friday was in focus. Last year, Fed Chair Powell dashed hopes for a swift end to the Fed's rate hikes. This year, the message was still hawkish but more balanced, highlighting data-dependency and keeping options open. There was no big reveal or shift in expectations, which the relatively muted market reaction confirmed. 

2.    Interest rate hike. Growth has stayed more resilient than most expected (including the Fed), though some downside remains as the rate hikes filter through the economy. It’s expected policy rates are now at, or nearing, a peak. Jerome Powell's suggestion that the Fed would "proceed carefully" when considering any further interest rate changes seemed to leave investors at ease Friday. Late Friday, the market was pricing in a roughly 81% probability that the Fed will hold rates unchanged following its September 19–20 meeting, according to the CME FedWatch Tool.

SPX sectors in play

Seven out of the 11 sectors of the SPX index gained for the week. Growth stocks handily outperformed value shares, helped by another substantial earnings and revenue beat by artificial intelligence chipmaker NVIDIA. Financials pulled back early in the week after S&P Global downgraded its credit ratings of five regional banks. Technology(XLK) and Communication Services(XLC) stocks  outperformed. Energy(XLE) and Consumer Staples(XLP) stocks lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Both Nasdaq(COMP) and S&P 500(SPX) indexes closed first weekly gains after three consecutive losses. While DJI ended slightly lower- its 2^nd weekly losses streak. 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 fell as investors grew more pessimistic about the country’s economic outlook. The Shanghai Stock Exchange Index(SSE) declined 2.17% to its lowest level since last December. While the blue chip CSI 300 fell 1.98%, is trading at its lowest level since November 2022. In Hong Kong, the benchmark Hang Seng Index(.HSI) which entered a bear market the previous Friday, rose slightly for the week with 0.03% gain, though it too is at its lowest level since November. (Refer to the above weekly performance table).  

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

1.    Disappointing data, signs of deflation, record youth unemployment, and continued liquidity problems in the debt-laden property sector have contributed to an erosion of confidence in China’s economy. 

2.    Signs of deteriorating growth—and a sense that China’s government has relatively few good options to arrest the downturn—have raised the prospect of accelerated capital outflows. Overseas funds sold the equivalent of USD 10.7 billion from the mainland market over the 13 trading days through Wednesday, according to Bloomberg, the longest stretch since it began tracking the data in 2016. 

3.    On Friday, state media reported that China has proposed that local governments can scrap a rule that disqualifies people who have ever had a mortgage—even those who have fully repaid them—from being considered a first-time homebuyer in major cities. The proposal was Beijing’s latest effort to shore up the property sector, which is under pressure from falling home prices and a rising number of developers defaulting on their debt. 

4.    Government stimulus. Recently China rolled out a series of measures to shore up investor confidence, including a cut to stamp duty on stocks trades. 1) China Securities Regulatory Commission(CSRC) to cut stamp duty on stock trading by 50% effective Aug 28; 2) CSRC will slow the pace of IPOs, 3) Restrict controlling shareholder to reduce its holdings through secondary market. 4) reduce margin ratio from 100% to 80% effective after close on Sep 8, 2023.

Technically, SSE Index ended 3^rd week down in a row, lost 6.8% to close at its lowest Since beginning of the year. Hang Seng index rebounded slightly after hitting new low intra-week. Both indexes technical indicators appear weak. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index rebounded after three-week consecutive decline. Rebounded 0.5% this week after hitting technical support level around 3150. For the index stocks, Seatrium, YZJ Ship led weekly gains with 4.41% and 2.38% respectively. DFI Retail and UOL were the worst performers. Technical support to around 3150, immediate upside resistance 3265 level.

STI weekly chart

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

Stocks Retreat for Third Consecutive Week

 Weekly Wrap Content for the week of Aug 18:

1. Week 33 major indexes performance;

2. Week 33 US sector indexes performance;

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

U.S.

For the week of 18 Aug, stocks were broadly lower as investors confronted potential challenges ranging from resurgent bond yields, high borrowing costs, and an aggressively inflation-focused Federal Reserve, to looming risks from overseas. The S&P 500 Index (SPX) ended the week down 5.15% from its July 27 intraday peak. Small-cap stocks performed the worst. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Strong consumer spending. The notable economic release of the week appeared to be Tuesday’s report from the Commerce Department on July retail sales, which jumped 0.7% over the month, roughly double consensus estimates. 

2.    No signs of recession. Some of the week’s other data seemed to raise the prospect of a “no landing” scenario—the possibility that the economy would continue to expand without experiencing a “soft landing” slowdown or a “hard landing” recession. Industrial production grew by 1.0% in July, roughly triple consensus estimates and its biggest gain since January. Nationwide housing starts also rose more than expected. 

3.    Interest rate hike. Federal Reserve’s July policy meeting seemed to raise worries about how policymakers would respond to continued growth signals. Investors appeared to interpret the tone of the minutes as generally hawkish. The positive economic surprises pushed the yield on the benchmark 10-year U.S. Treasury yield to its highest level since at least October 2022.

SPX sectors in play

All 11 sectors of the SPX index declined for the week. Technology(XLK) and Energy(XLE) stocks lost the least and Consumer Discretionary(XLY) and Communication Services(XLC) led losses. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Both Nasdaq(COMP) and S&P 500(SPX) indexes recorded 3^rd consecutive weekly losses. SPX ended at its 7-week low, lost 5.15% from its Jul 27 intra-day peak, a small retreat followed by its 19% rally from Mar to Jul this year. For the same period, the Nasdaq(COMP) index gave back 7.4% from its 30% rally. Both indexes’ uptrend still well intact. While DJI gave back 3.4% from 11.6% rally for the same period. The DJI ended at 5-week low and retreated to 34,500 level, which is a resistance-turn-support level now. 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 lost ground amid pessimism about the country’s flagging economic recovery. The Shanghai Stock Exchange Index(SSE) gave up 1.80% while the blue chip CSI 300 fell 2.58%. In Hong Kong, the benchmark Hang Seng Index(.HSI) plummeted 5.89%, its biggest weekly drop in five months, according to Reuters. (Refer to the above weekly performance table).  

ADR stocks on the move:

Alibaba Group (BABA) shares took a hit from the troubles back home in China, tumbling about 3%. Shares of other U.S.-listed Chinese companies followed suit, with search engine-operator Baidu (BIDU) falling 3.7%, e-commerce platform JD.com (JD) shedding about 5%, tech company NetEase (NTES) down 3%, carmaker Nio (NIO) losing more than 7%, online retailer PDD (PDD) down nearly 3%, and automaker XPeng (XPEV) dropping more than 5.5%.

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

1.   Official data for July revealed that China’s economic activity continued to weaken. Industrial output and retail sales grew at a slower-than-expected pace in July from a year earlier. Fixed asset investment growth in the first seven months of 2023 also missed forecasts. Urban unemployment edged up to 5.3% from June’s 5.2%, according to China’s statistics bureau. 

2.    The bureau did not release the youth unemployment rate, which rose every month in 2023 and hit a record 21.3% in June. The decision to suspend the closely watched indicator raised concerns that Beijing was suppressing information that it deemed politically sensitive. 

3.    More evidence of a property market downturn weighed on the outlook for a key sector of China’s economy. New home prices in 70 of China’s largest cities fell 0.23% in July from June, when they declined for the first time this year. 

4.    Country Garden, one of China’s largest property developers, suspended trading on several onshore bonds after the company missed interest payments on two dollar-denominated bonds the prior week. Meanwhile, China Evergrande, another leading developer that defaulted in 2021, filed for bankruptcy protection in New York, a move that protects the company from U.S. creditors as it works on debt restructuring deals in Hong Kong and the Cayman Islands, Bloomberg reported. 

5.    The People’s Bank of China unexpectedly cut its medium-term lending facility rate by 15 basis points to 2.5%, its largest reduction since 2020, as the country grapples with weak demand. The central bank also lowered the seven-day reverse repurchase rate, a short-term policy rate, by 10 basis points.

Technically, SSE Index dropped to lowest since Jan 4 this year. Hang Seng index plunged to its lowest since Nov 28. Both indexes technical indicators appear weak. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index plunged 3.65% this week-its largest weekly loss since 21 Feb 2022. For the index stocks, Sembcorp, SATS, SIA, OCBC, Kep were among the top five weekly losers which lost between 8.97% to 6.05%. While ComfortDelgro, ST Eng and Seatrium were the only three index stocks closed with gains of between 0.74% to 2.38%. Next major support to watch is at around 3130 Jul 7 low.

STI weekly chart

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

Stocks Mixed in Light Trading

Weekly Wrap Content for the week of Aug 11:

1. Week 32 major indexes performance;

2. Week 32 US sector indexes performance;

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

U.S.

For the week of 11 Aug, the major benchmarks ended mixed. Value stocks handily outperformed growth stocks, and the narrowly focused Dow Jones Industrial Average(DJI) managed a modest gain. The S&P 500 Index (SPX) and Nasdaq Composite (COMP) ended lower for the second straight week as stronger-than-expected inflation readings sent long-term Treasury yields near 10-month highs and technology shares extended a recent slide. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Inflation continues to trend in the right direction: Jul CPI was largely in line with the expectations, with headline CPI at 3.2% year-over-year, versus expectations of 3.3%. Core inflation, excluding food and energy, came in at 4.7%, in line with expectations and below last month's 4.8%. 

2.    The Fed seems likely to remain on hold for now: After the relatively benign inflation data last week, markets continue to expect the Fed to remain on hold through 2023. It is expected the Fed to hold the fed funds rate at the current 5.25% - 5.5% for an extended period, and leave the door open to additional rate hikes if needed and message this consistently. But overall, the next move by the Fed, perhaps in the first or second quarter of 2024, could be a rate cut, particularly if inflation continues to head toward its target range. 

3.    The economy is holding up better than expectations: the Fed's own GDP-Now forecasting tool pointing to Q3 U.S. GDP growth of a remarkable 4.1%, after above-trend growth in the first half of 2023. 

4.    Corrections after strong rallies typically average about -8.0% based on data since 1950. After a remarkably strong rally to start the year, markets have given back a bit in August thus far, with the S&P 500 down around 3% since its recent high on July 31. Nasdaq is down over 4.0% during this period, and the "Magnificent 7" large-cap stocks are down over 5.0%. 

SPX sectors in play

Eight out of 11 sectors within the SPX index closed higher for the week. Energy(XLE) and Healthcare(XLV) stocks outperformed. Health care shares got a boost at midweek from further evidence of the efficacy of diabetes drugs in treating obesity and related ailments, while Technology(XLK) and Consumer Discretionary(XLY) stocks underperformed on worries that rising rates would reduce the value of future profits. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Technically, Dow has been in sideway consolidation within its three-week trading range. Nasdaq retreated down to near its six-week low, SPX dipped to its four-week low after two consecutive weekly decline. DJI is holding well just above its 20dma, Nasdaq is the weakest among the three, trading way below 20dma and closed just beneath 50dma, SPX was trading in between its 20-/50-dma, closed just above 50dma this week. 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 mounting evidence that the country’s recovery may have peaked weighed on sentiment. The Shanghai Stock Exchange Index(SSE) declined 3.01% while the blue chip CSI 300 lost 3.39%. In Hong Kong, the benchmark Hang Seng Index(.HSI) gave up 2.38% ( refer to the above weekly performance table).  

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

1.    China's latest inflation data revealed that consumer and producer prices fell in tandem for the first time since November 2020, underscoring the weak demand throughout the economy. The consumer price index declined 0.3% in July from a year earlier and slipped into contraction for the first time since February 2021. The producer price index fell a worse-than-expected 4.4% from a year ago but slowed from June’s 5.4% decline. The release reinforced concerns that China has entered a deflationary period, which offset optimism about Beijing’s latest efforts to prop up demand after the State Council announced new measures last month to boost consumer spending. 

2.    Country Garden, one of China’s largest property developers, missed interest payments on two dollar-denominated bonds as it struggles with liquidity issues. The company expects to record a loss of RMB 45 billion to RMB 55 billion (USD 6.2 billion to USD 7.6 billion) in the first half of the year amid falling sales and rising refinancing costs, according to a statement released on Friday. 

3.    Trade data shows exports fell a larger-than-expected 14.5% in July from a year earlier, marking the weakest reading since the start of the pandemic in early 2020. Imports shrank by a worse-than-expected 12.4%, almost double the drop recorded in the previous month.

Technically, SSE Index’s 2.01% plunge on Friday concluded SSE’s weekly loss to 2.01%. The index gave back most of its previous two weeks’ gain and closed near its immediate technical support at around 3177 level. Hang Seng index ended the week below all its major moving averages, immediate technical support to watch in coming week(s) is at gap support 18950-19030 area. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index declined on Friday, negated its gains earlier this week. Closed on par with its previous week. Next major support to watch is at around 3250 level should it continue to fall.

STI weekly chart

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

Aug starts Down as U.S Debt Downgrade

 Weekly Wrap Content for the week of Aug 4:

1. Week 31 major indexes performance;

2. Week 31 US sector indexes performance;

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

U.S.

The major U.S. equity benchmarks started August with a down week after closing out a strong July. Stocks declined amid rising Treasury yields and an unexpected downgrade to the U.S. government’s credit rating. The technology-heavy Nasdaq Composite suffered the largest losses for the week. Refer to major indexes’ weekly and YTD performance table below.

Monthly performance for Jul.

Key highlights for the week and outlook:

1.    Fitch downgraded U.S. debt rating from AAA to AA+. This is the second credit downgrade in U.S. history after a similar decision by Standard & Poor's in August of 2011. U.S. political brinkmanship and debt concerns are not new, but the Fitch downgrade shines the spotlight on the worsening fiscal outlook. 

2.    The July jobs report provided mixed takeaways. The labor market is cooling but only slowly. Wage growth remains a concern. Monthly nonfarm payroll report showed that employers added 187k jobs in July, about the same as June’s downwardly revised 185k. The unemployment rate ticked down to 3.5% from 3.6% the prior month, while wages grew 4.4% over the 12-month period, unchanged from June. 

3.    The yield on the benchmark 10-year U.S. Treasury note increased from 3.95% at the end of the previous week to almost 4.20% by early Friday but decreased to about 4.05% following the release of the jobs report. 

4.    Earnings releases for mega-cap names Amazon and Apple in focus. Amazon(AMZN) significantly beat expectations, helped by strength in its core retail business, and the company’s stock rallied more than 9% at Friday’s open. Apple(AAPL), meanwhile, traded down about 3% after a mixed report that showed strength in its services business, although iPhone sales disappointed.

SPX sectors in play

10 out of 11 sectors within the SPX index closed down for the week. Energy(XLE) was the only sector closed higher, technology(XLK) and Communication Services(XLC) led the way down. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Technically, Dow had 1^st weekly down after three-week up streak, closed at two-week low, Nasdaq and SPX closed at their three-week low respectively. 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 rose as Beijing’s supportive stance offset concerns about the latest batch of disappointing economic data. The Shanghai Stock Exchange Index(SSE) gained 0.37%, while the blue chip CSI 300 advanced 0.7%. In Hong Kong, the benchmark Hang Seng Index(.HSI) declined 1.89% ( refer to the above weekly performance table).  

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

1.    China's cabinet, the State Council, announced new measures to revive consumption. The wide-ranging policies focused on removing restrictions on consumption in sectors including autos, real estate, and services, Reuters reported. However, the measures contained no mention of direct cash support to consumers to bolster spending, which some analysts have called for. 

2.    The People’s Bank of China (PBOC) pledged to support the development of China's real estate market during its biannual work conference, which was chaired by the newly appointed governor, Pan Gongsheng. 

3.    China’s official manufacturing Purchasing Managers’ Index (PMI) rose to 49.3 in July as expected, from June’s 49. However, it stayed below the 50-point threshold separating growth from contraction for the fourth consecutive month. The nonmanufacturing PMI declined to a weaker-than-expected 51.5 from 53.2 in June. Separately, the private Caixin/S&P Global survey of manufacturing activity eased to a below-forecast 49.2 in July from June’s 50.5 and marked a return to contraction after expanding for two months. Meanwhile, the Caixin survey of services activity unexpectedly rose for the seventh straight month as new business and operating conditions improved.

Technically, SSE Index edged higher built on previous week’s strong rally, but stayed in a range-bound consolidation for the week with no clear direction. Hang Seng index hit its major downtrend line resistance at beginning of the week and came down by profit-taking, closed just above its major moving averages support level. Bullish bias. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

Singapore stocks were soldoff hard this week after hitting the major resistance level just below 3400, even worse then my expected profit-taking. It gave back more than 90% of its previous weekly gains.

Technically, STI index immediate support at its 20dma around 3280, still well above all its major MAs which trend still up.

STI weekly chart

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