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.