New Year, Stocks Start Down

Weekly Wrap Content for the week of Jan 5:

1. Week 1 major indexes performance;

2. Week 1 US sector indexes performance;

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

U.S.

For the first week of new year 2024, U.S three major indexes declined. After nine straight weeks of gains, the S&P 500 finally took a breather, falling moderately last week, primarily due to some beginning-of-the-year repositioning, as well as a to-be-expected break after a stellar 16% rally in the final two months of the year. Investors appeared to rotate into sectors that lagged in 2023, including utilities, energy, consumer staples, and health care. Conversely, a slide in Apple shares following an analyst downgrade weighed on the large-cap, technology-heavy Nasdaq Composite Index. Refer to major indexes’ weekly performance table below.

Key highlights for the year and outlook:

1.    Stocks declined and interest rates moved higher last week, ending the S&P 500's nine-week winning streak. After the sharp move higher for equities over the last few months, it's not surprising to see markets take a breather. 

2.    Fed rate cuts are coming, but markets already factored in as many as 100 basis points(1%) cuts. The minutes from the Federal Reserve's December meeting were released last week, offering investors a look into policymakers' discussions and expectations. It confirmed that rates has hit its peak, also an acknowledgement that further hikes could be required if inflation were to make a surprise turn higher. 

3.    Geopolitical concerns appeared to weigh on sentiment as 2024 trading began.  1) In advance of upcoming elections in Taiwan, Chinese President Xi Jinping stated that “the reunification of the motherland is a historical inevitability.” 2) A further escalation of tensions in the Red Sea, with Iran sending a warship and the U.S. sinking attacking ships armed by Houthi rebels from Yemen. 

4.    The closely watched monthly nonfarm payroll report on Friday showed an add of 216k jobs in December, well above consensus forecasts. The workforce participation rate fell back unexpectedly to 62.5%, however, its lowest level since February. The ISM’s Non-Manufacturing Employment Index also fell sharply into contraction territory and hit its lowest level since July 2020. 

5.    The yield on the benchmark 10-year U.S. Treasury note ended higher for the week and moved above the 4% threshold for the first time since mid-December. (Bond prices and yields move in opposite directions.)

SPX sectors in play

Four out of the 11 sectors in SPX closed with weekly gains. Investors appeared to rotate into sectors that lagged in 2023, including utilities(XLU), energy(XLE), consumer staples(XLP), and health care(XLV). While Consumer Discretionary (XLY) and Tech(XLK) lagged following a downgrade on Apple shares. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three major indexes closed moderately down after nine weeks up in a row. A breather is needed for a healthy bull market to continue. Uptrend has been strong so far. 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 retreated amid persistent concerns about its economy. The Shanghai Composite Index(SSE) fell 1.54%, while blue chip CSI 300 gave up 2.97%. In Hong Kong, the benchmark Hang Seng Index declined 3%. (Refer to the above weekly performance table).  

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

1.    Economic data for December continued to show a varied picture of China’s economy. The official PMI contracted for the third consecutive month, falling to a below-consensus 49.0 in December. The nonmanufacturing PMI rose to 50.4 from 50.2 in November as stronger construction activity offset weakness in the services sector. Separately, the private Caixin/S&P Global PMI reading rose to an above-forecast 50.8 in December from November’s 50.7, its strongest reading since August. The private Caixin survey of services activity reached its highest level since July and beat estimates. 

2.    More evidence of China’s property slump underscored concerns about a key growth sector. New home sales by the country’s top 100 developers fell 34.6% in December from the prior-year period, up from the 29.6% drop in November, according to the China Real Estate Information Corp.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI down for 1^st week after a four-week winning streak. STI retreated after testing resistance level around 3250 early in the week. Most of the 30 STI index stocks start new year with losses, except YZJ Ship and ThaiBev closed with 4.03% and 2.86% gains. Kep DC Reit was the worst performer with 5.64% loss.

STI weekly chart

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