Stocks End Higher Following Inflation Data

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Weekly Wrap Content for the week of Jan 26:

1. Week 4 major indexes performance;

2. Week 4 US sector indexes performance;

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

U.S.

For the week ended 26 Jan, U.S three major indexes recorded another week of gains, bring the Dow Jones Industrial Average(DJI) and the S&P 500 Index(SPX) to new all-time highs and marking the 12th weekly advance out of the last 13 for the latter. The gains were relatively broad, although the small-cap Russell 2000 Index remained nearly 20% below its all-time intraday high. Refer to major indexes’ weekly performance table below.

Key highlights for the week and next:

1.    GDP. Q4 GDP growth exceeded forecasts, coming in at 3.3% annualized, beat expectations of 2.0% growth. Over the year as a whole, the economy grew 2.5%, up from the 1.9% pace in 2022. 

2.    PMI. U.S both manufacturing and services PMI data for January came in expansionary territory. Manufacturing PMI hitting 50.3 in January, well above expectations of 47.6 and higher than last month's 47.9 reading and reaching its highest reading since October 2022. Meanwhile, the services PMI came in at 52.9 for January, also in expansionary territory, above expectations of 51.5 and last month's reading of 51.4. 

3.    Inflation. The core personal consumption expenditure (PCE) price index, the Fed’s preferred inflation gauge, rose 2.0% in the fourth quarter over the year before—right in line with expectations and the Fed’s long-term target. Core PCE inflation for December is now 2.9% year-over-year, below last month's 3.2%, and below 3.0% for the first time since 2021. The ongoing moderation in inflation, despite above-trend economic growth, has led to optimism that the Federal Reserve may be able to start cutting policy rates rapidly this year to return to more neutral rates.   

4.    FOMC. All eyes turn to the next week FOMC meeting Jan 31, where the Fed is expected to keep interest rates on hold at 5.25% - 5.5%. While markets are currently pricing in about six Fed rate cuts in 2024, the Fed's own "dot plot" from its December meeting indicates about three rate cuts ahead.

SPX sectors in play

Eight out of the 11 sectors in SPX closed with weekly gains. Energy(XLE) and Communication Services(XLC) outperformed. Technology shares(XLK) took pressure after Intel (INTC) released disappointing earnings guidance late Thursday, sending the chipmaking bellwether reeling 12%. Intel's results preceded a big week ahead for mega-cap earnings, with Apple (AAPL), Amazon (AMZN), Google parent Alphabet (GOOGL), Facebook parent Meta Platforms (META), and Microsoft (MSFT) expected to report results.

While Consumer Discretionary(XLY) lagged. Major movers included Tesla, which fell sharply after the company missed both earnings and revenue estimates and warned of slower growth in 2024. Conversely, Netflix recorded solid gains after an upside surprise in subscriber additions. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All three major indexes recorded 3^rd weekly gains in a row. Both DJI and SPX made new all-time highs and marking the 12^th weekly advance out of the last 13 for the latter. 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 advanced after Beijing stepped in with forceful measures to support the economy. The Shanghai Composite Index(SSE) rose 2.75%, while the blue chip CSI 300 gained 1.96%. In Hong Kong, the benchmark Hang Seng Index advanced 4.2%. (Refer to the above weekly performance table).  

Key highlights for the week and next:

1.    The People’s Bank of China (PBOC) said it would cut its reserve ratio requirement (RRR) by 50 basis points for most banks on February 5, marking the central bank’s first cut in banks’ required reserves this year. PBOC Governor Pan Gongsheng also announced that the central bank will lower interest rates by 25 basis points for refinancing and rediscounting loans to support agriculture and small businesses from January 25. 

2.    Chinese banks left their one- and five-year loan prime rates unchanged as expected after the PBOC kept its medium-term lending rate on hold the prior week. 

3.    Chinese regulators removed the draft rules imposed on online video games in late December that were aimed at curbing spending and rewards. The regulations wiped off nearly USD 80 billion in market value from some of China's largest gaming companies when they were first announced as investors grew concerned about the possibility of another crackdown on the sector.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI inched higher 0.23% this week. Technically the local index continues its sideways trading within prior week’s trading range, between its 20 and 50dma. SIA and Genting Sp were among the top gainers of the week with 2.77% and 2.54% up, Jardine C&C and Seatrium were among top losers of the week, lost 8.52% and 7.14% respectively.

STI weekly chart

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