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.