Stocks Climb higher as Inflation Cools More Than Expected

Weekly Wrap Content for the week of Dec 22:

1. Week 51 major indexes performance;

2. Week 51 US sector indexes performance;

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

U.S.

For the week of 22 Dec, U.S three major indexes extended their winning streak, with the S&P 500 rising for eight consecutive weeks- the longest since 2017- as investors appeared to grow more assured that the economy would skirt a recession in the coming months. The S&P 500 Index briefly moved within 84 basis points (0.84 percentage points) of its all-time intraday high at the start of 2022, while the Nasdaq 100 Index and Dow Jones Industrial Average managed new records. Refer to major indexes’ weekly performance table below.

Key highlights for the week and outlook:

1.    Inflation cools more than expected. On Friday, the core (less food and energy) personal consumption expenditures price (PCE) index, the Fed’s preferred inflation gauge, rose only 0.1% in November, while October’s increase was revised lower to the same level. The headline PCE index fell 0.1% in November, marking its first decline in 21 months, thanks to a sharp decline in goods prices. 

2.    Expectations grow for steeper rate cuts in 2024. The reassuring inflation data led to a sharp decline in interest rate expectations over the coming year. According to the CME FedWatch Tool, futures markets ended the week pricing in a 82.1% chance of at least 100 basis points in rate cuts by the end of the year, up from 59.6% the week before. 

SPX sectors in play

Seven out of the 11 sectors of the SPX closed with gains in the week. Communication services(XLC) stocks led the gains, boosted by rises in Google parent Alphabet and Facebook parent Meta Platforms. Energy(XLE) shares also outperformed as oil prices rose in response to worries over attacks on shipping in the Red Sea. The typical defensive Utilities(XLU) and Consumer Staples(XLP) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

The SPX Index briefly moved within 84 basis points (0.84 percentage points) of its all-time intraday high at the start of 2022, while the Nasdaq 100 Index and Dow managed new records. Weekly candlesticks appear losing a bit of steam during holiday season but still bullish. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

Stocks in China declined after the government announced new restrictions on the gaming sector. The Shanghai Composite Index(SSE) gave up 0.94%, while blue chip CSI 300 fell 0.13%. In Hong Kong, the benchmark Hang Seng Index lost 2.69%. (Refer to the above weekly performance table).   

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

1.    Chinese regulators announced a draft of new rules aimed at curbing spending and rewards for online video games. The regulations wiped off nearly USD 80 billion in market value from some of China’s largest gaming companies as investors grew concerned about the potential impact on earnings and the likelihood of another crackdown on the sector. 

2.    In monetary policy news, Chinese banks left their one- and five-year loan prime rates unchanged, as expected, after the People’s Bank of China (PBOC) kept its medium-term lending rate on hold the prior week.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI ended positive in a relatively quiet week ahead of Christmas holiday season- its 3^rd consecutive weekly gain. Weekly candlestick appears bullish with more room to upside.

Among the index component stock, Seatrium, Venture and DBS were among top gainers of the week with 3-5% rises. While DFI, CDL and UOL lagged.

STI weekly chart

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

Stocks Extend 7th Straight Weekly Gains, Dow Hits Record High

Weekly Wrap Content for the week of Dec 15:

1. Week 50 major indexes performance;

2. Week 50 US sector indexes performance;

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

U.S.

For the week of 15 Dec, U.S three major indexes recorded their 7^th consecutive week of gains- the longest streak for the SPX since 2017. The gains lifted the both SPX and Nasdaq to 52-week highs and the Dow to an all-time record.  The SPX is now up nearly 23% for the year, with much of these returns still attributed to a handful of mega-cap technology stocks. A key driver behind these broad-based moves was last week's Federal Reserve meeting, which affirmed that rate hikes are likely over, and rate cuts could begin in 2024. With inflation cooling, yields moving lower, and the economy potentially on a glide path towards a soft landing, markets have much to celebrate this holiday season. Refer to major indexes’ weekly performance table below.

Key highlights for the week and outlook:

1.    Last FOMC meeting this year on Thursday proved to be a pivotal one for markets. Market estimates pointed to three rate cuts in 2024. 

2.    Stocks continue to rally in both stocks and bonds after Fed meeting. S&P 500 climbed over 2.0% last week after the dovish outlook from the Federal Reserve, and the index is up nearly 5% over the past month. As highlighted earlier, we are starting to see a broadening of market leadership emerge, especially as the notion of lower rates next year is embraced by investors. Over the past month, the Magnificent 7 stocks, which have led most of the year, were up just 1.5%, while the Russell 2000 small-cap index, a laggard in 2023, was up nearly 11%. 

3.    Inflation continue slows down. CPI data on Tuesday was in line with estimates, with core (excluding food and energy) inflation staying steady at a year-over-year rate of 4.0%.

SPX sectors in play

All 11 sectors of the SPX closed with gains in the week. Real Estate(XLRE) and Consumer Discretionary(XLY) among top gainers. While Communication Services(XLC) and Healthcare(XLV) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Both SPX and Nasdaq indexes hit their 52-week highs and the Dow to an all-time record. Weekly candlesticks appear very bullish no signs of immediate reversal. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

Equities in China declined as persistent deflationary pressures weighed on the economic outlook. The Shanghai Composite Index(SSE) fell 0.91%, while blue chip CSI 300 lost 1.7%. In Hong Kong, the benchmark Hang Seng Index rose 2.8% amid a global stock rally after the Fed kept interest rates steady on Wednesday and signaled it may start cutting them next year. (Refer to the above weekly performance table).   

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

1.    Deflation risk. China’s consumer price index fell 0.5% in November from the prior-year period, accelerating from October’s 0.2% contraction and marking the steepest drop since November 2020 as lower pork prices weighed on food prices. Meanwhile, the producer price index dropped a bigger-than-expected 3% from a year ago, marking the 14th monthly decline. Deflation is concerning for China since economists worry it could unleash a downward spiral of economic activity. 

2.    Other November data continued to paint a mixed picture of China’s economy. Industrial production grew a better-than-expected 6.6% last month from a year earlier, while retail sales surged 10.1% but missed expectations. Fixed asset investment rose a weaker-than-forecast 2.9% in the first 11 months of the year as declines in infrastructure growth and real estate investment deepened. 

3.    Senior officials drafted the agenda for China’s economy in 2024 during the Central Economic Work Conference, an annual meeting that sets economic policy for the coming year. Officials reportedly set out guidelines aimed at boosting domestic consumption and investment to drive growth as weak consumer confidence and a property sector downturn remain key risks for the economy.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI has been in sideway consolidation for two months near its past two and half year major technical support around 3060 area, after it cycled down in July from its year high near 3400. 3050-3060 area should provide a strong technical support for the index going forward, it appears there are plenty of room to upside. 

The interest-rate-sensitive parts of the market performed better in the week, such as SG REITs and developers outperformed. It should be a big relief going forward for the badly battered REITs sector if interest rates were to stabilise or cut down.

Among the index component stock, CDL, Mapletree Pan Asia Com, MIT, CICT UOL were among top gainers with more than 5% up. While Venture and Wilmar were laggers with 3% and 4.7% losses respectively.

STI weekly chart

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

Stocks End Flattish As Small-Caps Catching Up

Weekly Wrap Content for the week of Dec 8:

1. Week 49 major indexes performance;

2. Week 49 US sector indexes performance;

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

U.S.

For the week of 8 Dec, U.S three major indexes ended flat to modestly higher. The small-cap Russell 2000 Index outperformed the S&P 500 Index for the third time in the past four weeks, helping narrow its significant underperformance for the year-to-date period. Refer to major indexes’ weekly performance table below. 

Key highlights for the week and outlook:

1.    Latest Job data. The U.S. economy added 199,000 jobs in November, slightly more than expected, the unemployment rate fell to 3.7% (a four-month low), and the labor-force participation ticked higher, all pointing to a healthy labor market. 

2.    U.S Q3 GDP was up 5.2%, more than twice the U.S. economy's long-term potential. 

3.    Inflation is falling faster than the Fed projections. Feeding into optimism for a soft landing in the economy, inflation has slowed sharply, even as the unemployment rate remains low and demand strong. Fed-fund futures are now pricing in rate cuts as early as March, though July was expected just few weeks ago. 

SPX sectors in play

All but one out of the 11 sectors of the SPX closed in red in the week. Communication Services(XLC) was the only sector closed positive. Financials(XLF) and Industrial(XLI) among the laggers. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

The major three U.S stock indexes closed flattish to modestly higher, recorded six weeks gains in a row. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

Equities in China fell after a credit downgrade on China’s sovereign debt by Moody’s underscored worries about its economic outlook.  The Shanghai Composite Index(SSE) fell 2.05%, while blue chip CSI 300 lost 2.40% after falling midweek to its lowest level in nearly five years. In Hong Kong, the benchmark Hang Seng Index fell 2.95%. (Refer to the above weekly performance table).  

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

1.    Moody’s cut its outlook for China’s government bonds to "negative" from "stable" on Tuesday, saying that the country’s debt-laden local governments and state firms posed downside risks to the economy. In response, Beijing issued a flurry of pro-growth measures this year to shore up demand, although analysts say the measures have been insufficient to revive the economy. 

2.    Bearish sentiment about China’s longer-term outlook appeared to lead investors to look past the private Caixin/S&P Global survey of services activity, which rose to an above-forecast 51.5 in November from October’s 50.4.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

Singapore STI rebounded from around 3055 support area. Among the index component stock, Genting Sp and Seatrium were the two stocks outperformed with more than 6% weekly gains. While Sembcorp Ind and DFI RG were two laggers with 4.8% and 3% losses. STI was trading within its five-week rangebound.

STI weekly chart

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

Stock and Bond Markets Rally as Cooling Inflation

Weekly Wrap Content for the week of Dec 1:

1. Week 48 major indexes performance;

2. Week 48 US sector indexes performance;

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

U.S.

For the week of 1 Dec, U.S three major indexes ended higher, with the S&P 500 Index and Nasdaq Composite rounding out on Thursday their best monthly gains (8.9% and 10.7%, respectively) since July 2020. Falling Treasury yields seemed to continue to boost sentiment, and a broad index of the bond market recorded its best monthly gain since 1985. Refer to major indexes’ weekly performance table below.

It was the second-best November performance in the last 30 years.

Stocks has been on their comeback tour in 2023, SPX index gained c.20% so far this year after a lousy 2022. U.S stocks gained 9% in November, the best month in nearly a year and a half. It’s the first monthly gain since July, fully recovered prior three months losses from Aug to Oct, remarkable.

The strong November run was supported by favourable news in all right spots: 1) inflation continued to trend lower, 2) possible stop of interest rate hike from here, 3) resilient economy and 4) better than expected corporate earnings. Refer to below monthly performance for major indexes under my watchlist.

Key highlights for the week and outlook:

1.    Latest CPI readings showed inflation remains in a downtrend. As reported on Thursday, Fed’s preferred inflation gauge, the core (less food and energy) personal consumption expenditures (PCE) price index, rose 0.2% in October, a slowdown from September. 

2.    Fed’s well noted hawkish officer Christopher Waller surprised investors by telling a Washington conference that “I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent.” In a speech on Friday, Fed chair Powell acknowledged that interest rates were now “well into restrictive territory.” 

3.    Continuing jobless claims hit two-year high, offered some evidence that the economy may be headed toward goal of a “soft landing”.

SPX sectors in play

10 out of the 11 sectors of the SPX closed higher in the week. Real Estate(XLRE), Materials(XLB) and Financials( XLF) were among top performers. While Energy(XLE) and Communication Services(XLC) lagged this week. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

The major three U.S stock indexes touched a YTD high, the SPX is now within 5% of all-time high in Jan 2022. Indexes are at their Jul high after a five-week rally. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

Equities in China retreated as as official indicators underscored concerns about the country’s fragile recovery.  The Shanghai Composite Index(SSE) gave up 0.31%, while blue chip CSI 300 lost 1.56%. In Hong Kong, the benchmark Hang Seng Index fell 4.15%. (Refer to the above weekly performance table).  

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

1.    Economic data for October provided a mixed snapshot of China’s economy. The official manufacturing Purchasing Managers’ Index (PMI) fell to a below-consensus 49.4 in November from 49.5 in October, marking the second consecutive monthly contraction. The nonmanufacturing PMI slipped to a lower-than-expected 50.2 from 50.6 in October. 

2.    Chinese authorities issued a 25-point plan to step up financial support for the private sector in Beijing’s latest effort to boost business confidence. The measures aim to unblock financial channels such as loans, bonds, and equity financing. 

3.    Profits at industrial firms increased by 2.7% in October from the year-ago period but slowed from September’s 11.9% gain. For the first 10 months of 2023, profits fell by 7.8% from a year ago, slowing from a 9% contraction recorded in the first nine months of the year.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

Singapore STI fell marginally this week, its 2^nd straight weekly down. The trio local banks were flattish. Among the index component stock, ThaiBev, Seatrium and HKland were among the worst performers with c.5% losses. Keppel was the best performer with 6.53% weekly gain. STI was trading within its five-week rangebound.

STI weekly chart

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