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.