U.S. Stocks Down on Hotter than Expected Inflation

 Join SgTraderClub Facebook group HERE for daily stocks and market updates, and more.

Weekly Wrap Content for the week of Feb 16:

1. Week 7 major indexes performance;

2. Week 7 US sector indexes performance;

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

U.S.

For the week ended Feb 16, U.S three major indexes closed lower, breaking a five-week winning streak after higher-than-expected Consumer Price Index (CPI) readings Tuesday and Producer Price Index (PPI) report on Friday, further deflating investor hopes for lower interest rates any time soon. The declines were concentrated in large-cap growth stocks, however, with an equally weighted version of the S&P 500 reaching a record intraday high on Thursday. Refer to major indexes’ weekly performance table below.

Key highlights for the week and next:

1.    January CPI and PPI data was disappointing for investors in the week. The headline CPI figure came in at 3.1% year over year, above expectations for 2.9% but, notably, still lower than December’s 3.4%. Core inflation (excluding food and energy) remained stickier at 3.9% year over year, above expectations for 3.7% and in line with December’s reading. 

2.    Similarly, PPI inflation, which measures the prices received by producers of domestic goods and services, came in above expectations on headline and core figures. In January, headline PPI was 0.9% year over year, above forecasts of 0.6% but below December’s 1% reading. 

3.    Fed interest rates cut. Prior to last week, markets had been forecasting around five rate cuts, starting at the May Fed meeting. Now the expectation is for around four rate cuts, perhaps starting at the June meeting. 

4.    Upcoming PCE data. The Fed’s preferred metrics of inflation, personal consumption expenditure (PCE) inflation next reading will come on Feb. 29, and the expectation is for a moderation in both headline and core PCE inflation annually.

SPX sectors in play

Seven out of the 11 sectors in SPX closed with weekly gains. The large-cap growth stocks which outperformed previous week, however, led the declines this week. Technology (XLK), Communications services (XLY) and Consumer Discretionary(XLY) among top losing sectors, while Energy(XLE) and Materials(XLB) outperformed. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

The S&P 500 Index(SPX) recording its first weekly decline since the start of the year. It’s believed inflation can continue lower in the year ahead, albeit perhaps not consistently downward. Investors should using the period of volatility as opportunities to add to portfolio ahead of the start of a multiyear Fed rate-cutting cycle. All the three indexes uptrend are well intact after all.

Click below three indexes for their weekly charts respectively.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Financial markets in mainland China were closed, and no official indicators were released due to the weeklong Lunar New Year holiday, which began Saturday, February 10.

In Hong Kong, the benchmark Hang Seng Index rose 3.77%. (Refer to the above weekly performance table).  

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

1.    Early data showed a pickup in consumer spending over the Lunar New Year, China’s most important holiday. More than 61 million rail trips were made in the first six days of the national holiday, a 61% increase over last year’s holiday, according to official media reported by Bloomberg. Travel by road and airplane also improved, while hotel sales on Chinese e-commerce platforms increased more than 60%, according to state media. 

2.    Box office receipts in the first four days of the holiday declined from last year, according to Bloomberg using data from online movie ticket platform Maoyan Entertainment, suggesting that consumers may have reduced their spending per trip. Nevertheless, evidence of strong holiday spending will likely be welcome news for China’s government, which is grappling with deflation and a yearslong property sector crisis that has dampened consumer confidence. China’s stock markets resume trading on Monday, February 19.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI rallied 2.67% in the shortened trading week after the Chinese New Year holiday. SGX resumed trading on Tuesday and the STI index had a more than 200 points high-low swing in just three days. Gains were led by three local banks. DBS +4.09%, UOB+3.73% and OCBC+2.39%.

Among the 30 STI index stocks, 26 of them closed with gains and 3 losses. SIA was the top gainer with 7.65% up and JMH was at the bottom with 2.78% loss. The index’s next major technical resistance level at around 3250 and immediate downside support at around 3184 its 200dma.

STI weekly chart

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