SgTraderClub Weekly Stocks Updates: U.S. Tech Stocks Hit New Records While Dow Retreat

Sunday, May 26, 2024

U.S. Tech Stocks Hit New Records While Dow Retreat

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Table of Content:

1. Major indexes weekly performance

2. S&P 500 sector index weekly performance

3. Major indexes weekly chart and technical support & resistance levels

U.S.

For the week ended May 24, the U.S major indexes recorded widely varying results, with the Dow Jones Industrial Average(DJI) recording its biggest weekly loss (-2.33%) since early April, while the technology-heavy Nasdaq Composite(COMP) continued its recent march into record territory. The broad S&P 500 Index(SPX) was roughly flat, while small-cap stocks(Russell 2000) lost ground. The market was scheduled to be closed on coming Monday public holiday. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1. NVIDIA beats estimates. A primary factor driving the market’s divergence was the gain in shares of AI chipmaker NVIDIA(NVDA), now the third-largest company in the S&P 500 by market capitalization (trailing only Apple and Microsoft). After beating consensus estimates, NVIDIA shares rose 9.3% on Thursday, adding roughly USD 220 billion to its market capitalization.

2. Interest rate cut. Data suggesting a rebound in growth in May - leading to speculation that the Fed would wait longer to cut interest rates. S&P Global reported that its composite index of business activity had jumped unexpectedly to 54.4 in May, its highest level in just over two years. Futures markets began pricing in only a 39.9% chance of more than one Fed rate cut this year, down from 57.3% the week before, according to the CME FedWatch Tool.

3. Earnings growth upbeat. About 95% of S&P 500 companies have reported Q1 earnings, and of these, nearly 80% have exceeded earnings expectations, above the long-term average rate of 77%. Earnings growth for the quarter is now forecast to come in at a healthy 6%, above the expectation for 3.5% growth at the start of the quarter.

SPX sectors in play

Two out of the 11 sectors of SPX closed with gains. Technology(XLK) and Communication Services(XLC) outperformed this week. Financials(XLF) and Energy(XLE) lagged. Refer to below SPX sectors ETF weekly performance table.

SPX is heavily weighted toward technology and growth sectors. Three growth sectors i.e. communication services(XLC), consumer discretionary(XLY) and technology(XLK) – which all house the "Magnificent 7" stocks, make up about 50% of the index weight. Refer to below SPX sector indexes weightings.

Indexes technical levels

All three indexes reached record highs during the week. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks retreated as fears that rates would remain elevated in the U.S. offset optimism about Beijing’s latest measures to shore up the ailing property sector. The Shanghai Composite Index(SSE) declined 2.07%, while the blue chip CSI 300 lost 2.08%. In Hong Kong, the benchmark Hang Seng Index fell 4.83%. (Refer to the above weekly performance table).

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

1. The People’s Bank of China (PBOC) announced a historic rescue package for the property sector in the prior week as data showed no sign of letup in China’s housing crisis. Measures included 1) a re-lending program that would extend RMB 300 billion in low-cost funds to a select group of state-owned banks to lend to local state-owned entities for buying unsold homes, 2) removing the nationwide floor level of mortgage rates, and 3) lowering the minimum down payment ratio for home purchases.

2. Chinese banks left their one- and five-year loan prime rates unchanged at 3.45% and 3.95%, respectively, as expected, after the PBOC kept its medium-term lending rate on hold.

Hang Seng Index component stocks weekly return: