Stocks End a Weak September

Weekly Wrap Content for the week of Sep 29:

1. Week 39 major indexes performance;

2. Week 39 US sector indexes performance;

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

U.S.

For the week of 29 Sep, U.S three major indexes were lower. The S&P 500 Index suffered a fourth consecutive weekly pullback, as upward pressure on rates appeared to weigh on investor sentiment. Higher oil prices contributed to concerns that inflation could prove more difficult for central banks to tame, spurring a sell-off in bonds. As the week wore on, the increasing likelihood of a U.S. government shutdown may also have weighed on investor sentiment. The yield on the benchmark 10-year U.S. Treasury note peaked above 4.6% on Wednesday. Refer to major indexes’ weekly performance table below.

September was a lousy month, with the S&P 500 falling nearly 5%. Rising rates and concerns that tighter Fed policy will undercut the economy drove additional weakness in growth and small-cap investments, with the Nasdaq and Russell 2000 indexes both shedding close to 6% for the month. This capped off an overall 3% drop for the S&P 500 for the third quarter, the first quarterly loss in a year.

Key highlights for the week and outlook:

1.    Inflation check. The latest inflation report on Friday (the core personal consumption expenditure price index [core PCE] – the Fed's preferred measure of inflation) which showed the first drop below 4% in more than two years. PCE index for Aug increased 3.9% from year-ago levels—the lowest annual inflation rate in about two years but above the central bank’s 2% target. 

2.    Government shutdown will occur if Congress fails to pass legislation to authorize government spending for the new fiscal year beginning on October 1. With the funding deadline looming and little progress being made so far on a broader budget bill, it’s expected Congress will also pursue a short-term stopgap measure, called a continuing resolution, which would fund the government and avoid a shutdown while negotiations continue. 

3.    Interest rate. The 10-year Treasury yield jumped above 4.6% at one point in the week, its highest since 2007. After a decade and a half of ultra-low interest rates, this has come with some discomfort. Rising rates have weighed on stock returns, but peaks in 10-year yields have been a catalyst for stock-market rallies. 

4.    Q4 Outlook. While Q4 returns have been higher following third-quarter declines, the fourth quarter is traditionally a solid period for stocks, with an overall average quarterly increase of 5% going back to 1990. 

SPX sectors in play

Three out of the 11 sectors of the SPX index closed positive for the week. Within the index, utilities(XLU) lost the most ground. Energy(XLE) stocks, on the other hand, outperformed. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

The three major indexes mixed for the week. The SPX dropped for a fourth-consecutive week and lost 4.9% for the month(refer to the above monthly performance table). All three indexes declined for 2^nd consecutive month. SPX major technical support at around 4200 level-its 200dma. 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 in a holiday-shortened week as a lack of positive news on the economy dampened investor sentiment. The blue chip CSI 300 Index and Shanghai Composite Index both fell for the week ended Thursday. Stock markets in mainland China were closed Friday, the start of a 10-day holiday for the Mid-Autumn Festival and National Day, and will reopen Monday, October 9.  The Shanghai Stock Exchange Index(SSE) lost 0.7% while the blue chip CSI 300 fell 1.32%. In Hong Kong, the benchmark Hang Seng Index(.HSI) declined 1.37%. (Refer to the above weekly performance table).  

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

1.    Latest official data released on Sat (Sep 30) shows China's factory activity expanded for the first time in six months in September, adding to a run of indicators suggesting the world's second-largest economy has begun to bottom out. China Sept manufacturing PMI 50.2 vs 49.7 in Aug; non-manufacturing PMI 51.7 vs 51.0 in Aug.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index rebounded 0.39% for the week after previous week’s loss, the index has been in five weeks consolidation in the range of 3290-3189. There were 14 out of 30 stocks recorded positive weekly return in the STI index. Top gainer was HKland with 3.48% and worst performer was Venture with 5.43% loss.

STI weekly chart

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