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.