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.