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.