Stocks Close Up After Fed’s Dovish Signals

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

Weekly Wrap Content for the week of Mar 22:

1. Week 12 major indexes performance;

2. Week 12 US sector indexes performance;

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

U.S.

For the week ended Mar 22, U.S. stocks closed higher, pushing all three major indexes to new records, as investors welcomed news that Federal Reserve policymakers were still anticipating three interest rate cuts later in the year. The more cyclical parts of the market, including small-cap and mid-cap stocks and sectors like industrials and financials, were among the top-performing for the week. The better economic outlook and potential for lower interest rates may be longer-term catalysts for a broadening of market leadership. Trading the following week was scheduled to end on Thursday in observance of the Good Friday holiday. Refer to major indexes’ weekly performance table below.

Key highlights for the week and next:

1.    The Fed held its March FOMC meeting and press conference and also released an updated set of economic projections in the week. The Fed left the fed funds rate on hold at 5.25% - 5.5%, but its updated "dot plot" still pointed to three rate cuts in 2024. The FOMC also sees the fed funds rate gradually heading to around 3.1% by 2026, indicating that this year is likely the start of a multiyear rate-cutting cycle. 

2.    Overall, markets welcomed the more dovish messaging coming out of the Fed and Chair Jerome Powell, who did not take the opportunity to push back on rising stock prices and easing financial conditions. Stock markets reach new highs and bond markets move higher, as Treasury yields softened. The better economic outlook and potential for lower interest rates may be longer-term catalysts for a broadening of market leadership. 

3.   In addition to the Federal Reserve, major global central banks, including the Bank of Japan (BoJ), the Swiss National Bank (SNB), and the Bank of England (BoE), also held policy meetings last week. The BoJ raised interest rates for the first time in 17 years, from -0.1% to 0.1%, abandoning the negative interest-rate policy regime after eight years.

SPX sectors in play

All11 sectors but one in the SPX closed with weekly gains. Communication services(XLC) led the gains along with technology(XLK) shares. A late rise helped artificial intelligence chipmaker NVIDIA(NVDA) reach a record high on Friday and lift the company’s market capitalization near USD 2.4 trillion. Reports that Apple(AAPL) might partner with Google parent Alphabet(GOOGL) in offering generative artificial intelligence tools also boosted sentiment. Health care(XLV) and real estate(XLRE) shares lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three indexes rise to their weekly new records. Markets indicators show technical overbought signals, weekly RSI of SPX registered at highest level since Jan 2020. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China equities retreated as concerns about the property sector slump offset optimism about better-than-expected economic data. The Shanghai Composite Index(SSE) declined 0.22%, while the blue chip CSI 300 gave up 0.70%. In Hong Kong, the benchmark Hang Seng Index lost 1.32%. (Refer to the above weekly performance table).   

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

1.    Property investment in China fell by 9% in the January–February period from a year earlier, slowing from a 24% drop in December, according to official data. Property sales by floor area sank 20.5% in the first two months of the year, after slumping 23% in December. The slower pace of declines in property investment and sales came after Beijing rolled out numerous pro-growth measures to arrest the country’ yearslong real estate slump. However, most investors remain cautious about China’s property sector as developers continue to grapple with high debt levels and weak homebuyer demand.

2.    Other data showed that some parts of China’s economy were picking up. Industrial production rose an above-forecast 7% in January and February from a year earlier, up from December’s 6.8%. Fixed-asset investment grew 4.2% in the first two months of the year from the prior-year period, rising from 3% in December amid higher infrastructure growth. Retail sales rose more than expected over the two-month period as consumption surged during the weeklong Chinese New Year holiday but eased from December’s increase. 

3.    Chinese banks left their one- and five-year loan prime rates unchanged at 3.45% and 3.95%, respectively, as expected, after the People’s Bank of China 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 index rose for 3^rd consecutive, gained 1.42% this week. Interest rate sensitive stocks such as Reits and developers in the STI index outperformed, the three banks also charged higher, DBS and OCBC hit new one year record.

Technically, STI is approaching its major resistance level at around 3250 quickly after three consecutive weeks up. The index currently trading above all its major moving averages(MA) 20,50 and 200daily MA, which is bullish. Going forwards, immediate technical support at around its 200dma 3180 level, upside resistance at around its previous high 3250 level.

Top weekly gains: YZJ Ship +9.41%; Sembcorp Ind+4.55%;

Top weekly losers: Seatrium -11.24%; JMH -6.01%

STI weekly chart

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