Stocks Mixed Again As Rotation Continues

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

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

U.S.

For the week ended Jul 26, major U.S. indexes recorded mixed returns for the second consecutive week. Small-cap and value shares continuing to outpace the large-cap growth stocks that have led the market over much of the year. At the close of trading on Thursday, the technology-heavy Nasdaq Composite 100 Index(NDX) was lagging the broader S&P 500 Index(SPX) and barely outperforming the small-cap Russell 2000 Index(RUT) for the year to date, before large-cap growth shares rebounded to close the week. 

The week was also notable for the SPX selling off on Wednesday by more than 2% for the first time since February 2023, while the Nasdaq suffered its worst loss since October 2022. The Dow Jones Industrial Average (DJI) had a particularly strong close, as industrial conglomerate 3M Co. (MMM) rocketed higher after delivering expectations-beating quarterly numbers. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.    Q2 earnings underway. We are amid Q2 earnings season, and with about 41% of S&P 500 companies having reported thus far, earnings are on track to grow 9.7% year-over-year, above expectations for 9% growth at the end of the Q1. The largest upside earnings surprises are coming from sectors like financials, energy, and health care, more so than technology and growth sectors. 

2.    A 12.33% decline in Tesla and a 5.03% decline in Class C shares of Google parent Alphabet following earnings reports contributed heavily to Wednesday’s declines. 

3.    Inflation continues to moderate. Core (less food and energy) personal consumption expenditures (PCE) price index reading released in the week rose a tick more than expected (0.2%) in June but stayed steady at an annual rate of 2.6%—not too far above the 2.0% target for the Federal Reserve’s preferred inflation gauge. The inflation data appeared to cement expectations for a Fed rate cut at its September meeting. 

4.    Expecting interest rate cuts. Markets now more meaningfully believe in Fed interest-rate cuts in the back half of the year, with the CME FedWatch tool indicating markets are pricing in three rate cuts: at the September, November and December Fed meetings. 

5.    Presidential election impact on stock market. Last week, Biden made a historical decision to drop out of the presidential election late in the race, and endorsed VP Harris for the job. The betting odds and early polling have shown that it is a much closer race between VP Harris and former President Trump than with President Biden as the candidate. From a market perspective, these moves have increased uncertainty around the election outcome – and markets tend not to like uncertainty. In fact, history shows us that market volatility tends to increase ahead of election day, and then subside afterwards, regardless of who is in power. This could be in part because some uncertainty is lifted after the election is over, and markets can again focus on opportunities ahead.

 

SPX sectors in play

Seven out of the 11 sectors of SPX closed with gains for the week. Markets continued the rotation that began earlier this month, with small-cap stocks and value and cyclical sectors all outperforming mega-cap technology and growth sectors.

Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

DJI index closed its 4^th weekly up in a row, Nasdaq and SPX closed 2^nd weekly decline. Nasdaq(COMP) closed below 50dma since early May and SPX tested its 50dma and closed just above it. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks fell after unexpected rate cuts by the central bank failed to instill confidence in the economic outlook. The Shanghai Composite Index(SSE) declined 3.07% and the blue chip CSI 300 was down 3.67%. In Hong Kong, the benchmark Hang Seng Index retreated 2.28%. (Refer to the above weekly performance table).

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

1.    China’s central PBoC cut its medium-term lending facility (MLF) by 20 basis points to 2.3%, its first reduction since August 2023, after holding the rate steady at its regularly scheduled operation on July 15. The move came on Monday, after the central bank reduced its seven-day reverse repo rate, a key short-term policy rate, by 10 basis points to 1.7%. Shortly afterward, Chinese banks cut their one- and five-year loan prime rates by 10 basis points to 3.35% and 3.85%, respectively, making it cheaper for consumers to take out mortgages and other loans. 

2.    A lack of significant policy initiatives following the Third Plenum, a once-in-five-year meeting of top officials in the ruling Communist Party, also contributed to bearish sentiment. During the three-day meeting that ended July 18, President Xi Jinping vowed to make “high-quality development” the main priority for China but provided no detailed policies, disappointing those who hoped for measures to bolster consumption and end a yearslong property slump.

SSE weekly chart

.HSI weekly chart

Singapore

STI index lost another 0.61% in its 2^nd consecutive weekly loss, but it appears the selling much under control, nothing panic. The index just closed below its 20dma for the first time in a month and still way above its 50dma at around 3370 level which indicate uptrend is well intact.

Refer to below index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

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

Investors Turn to Value and Small-Caps from Tech

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

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

U.S.

For the week ended Jul 19, major U.S. indexes ended mixed in a week that saw a continued rotation in market leadership to small-cap and value shares.  The narrowly focused Dow Jones Industrial Average (DJI) outperformed, and value stocks outpaced growth stocks by 477 basis points (4.77 percentage points), as measured by Russell indexes (Russell 2000)—the largest divergence since March 2023, when growth shares outperformed by 654 basis points. The week was also notable for a widespread global disruption to computer systems early Friday due to an error in a vendor’s security update to some users of the Microsoft operating system. The problems seemed to have little impact on U.S. trading, however. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.   A major factor in the underperformance of growth stocks was a sharp decline in chip stocks on Wednesday, following news that the Biden administration had told allies it was considering severe export curbs if companies such as Tokyo Electron(TOELY) and the Netherlands’ ASML Holding(ASML) continued providing China with access to advanced semiconductor technology. Chip giants Taiwan Semiconductor Manufacturing(TSM), Broadcom(AVGO), and NVIDIA(NVDA, the third-largest company by market capitalization) also fell sharply. 

2.    Sector rotation was the key theme for financial markets last week. The tech sector faded while cyclical sectors, which have lagged this year, saw upward momentum. This was underscored by the sharp rally in small-cap stocks. 

3.    Polls showing an increasing likelihood of a Republican sweep in the November elections also appeared to favor value stocks. The prospect of lighter banking regulation seemed to provide a boost to the value-oriented financials sector, for example, while the prospect of higher tariffs under a Trump administration may have favored industrials and business services shares. 

4.    Generally upbeat economic data in the week. Retail sales, excluding the volatile gas and auto segments, jumped 0.8% in June, well above consensus and the most since January 2023. 

5.    Powell sees inflation and growth in “much better balance”. Fed Chair Jerome Powell addressed the central bank’s dual mandate during a speech on Monday, saying, “Now that inflation has come down and the labor market has indeed cooled off, we’re going to be looking at both mandates. They’re in much better balance.” 

SPX sectors in play

Five out of the 11 sectors of SPX closed with gains for the week. Weakness in the tech sector was the primary driver last week, highlighted by a divergence in the broader indexes, as the S&P 500 and Nasdaq posted losses while the Dow (with a lower exposure to technology stocks) finished higher, briefly topping 41,000 for the first time and extending its weekly winning streak to three. Energy sector(XLE) outperformed, and Technology(XLK) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

S&P 500(SPX) and Nasdaq(COMP) posted losses while the Dow finished higher, briefly topping 41,000 for the first time and extending its weekly winning streak to three. Small companies index Russell 2000 performed the best with another 1.68% weekly gains after previous 6% rally. 

Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks rose as investor sentiment was largely unaffected by weaker-than-expected economic growth in the second quarter. The Shanghai Composite Index(SSE) was up 0.37% and the blue chip CSI 300 added 1.92%. In Hong Kong, the benchmark Hang Seng Index retreated 4.79%. (Refer to the above weekly performance table).

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

1.    China’s GDP expanded a below-consensus 4.7% in the second quarter from a year earlier, slowing from the 5.3% growth in the first quarter. On a quarterly basis, the economy grew 0.7%, less than half of the first quarter’s revised 1.5% expansion. 

2.    Other data also highlighted weakness in the economy. Retail sales grew a below-forecast 2% in June from a year earlier, down from a 3.7% increase in May, partly driven by lower autos and household appliances sales. Industrial production rose a better-than-expected 5.3% in June from a year earlier but slowed from May’s 5.6% increase. Fixed asset investment rose 3.9% in the January-to-June period from a year ago, in line with forecasts, though property investment fell 10.1% year on year. The urban unemployment rate remained steady at 5%, while the youth jobless rate dropped to 13.2%, the lowest level since December. 

3.    China’s Property sector downturn persists. China’s new home prices fell 0.7% in June, matching May’s 0.7% drop and extending losses for the 12th consecutive month, according to the statistics bureau.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index lost 1.44% for the week- its first weekly down after 4-week consecutive up.  The index seen profit-taking after recent rally. Refer to below index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

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

Stocks Hit New Records as Consumer Prices Fall to Three-Year Low

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

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

U.S.

For the week ended Jul 12, major U.S. indexes hit record highs in the first notable broad advance since mid-April. The DJI, SPX and technology-heavy Nasdaq Composed moved to record intraday highs, but the biggest advance was notched by the small-cap Russell 2000 Index, which gained 6.00%, marking its best week since early November. Q2 earning season started on Friday, investors also waiting for the arrival of major earnings reports. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.    U.S consumer price index (CPI) inflation at 3.0% on a year-over-year basis in June, the lowest reading since March 2021. Headline prices fell 0.1% in June, marking the first decline since soon after the start of pandemic lockdowns in May 2020. 

2.    Earnings season unofficially started on Friday, with Q2 earnings releases from JPMorgan Chase(JPM), Wells Fargo(WFC), and Citigroup(C). SPX Q2 earnings YoY is estimated to be 8.8%, which would be the fastest pace since Q1 of 2022. 

3.    Interest rate cuts. There's virtually no chance of a July rate cut, according to the CME FedWatch Tool, but investors place odds at 94% that rates will fall 25 basis points by the September Federal Open Market Committee (FOMC) meeting. The market expects two or three rate cuts by the end of the year. 

SPX sectors in play

10 out of the 11 sectors of SPX closed with gains for the week. Rates sensitive sectors such as Real Estate (XLRE) and Materials (XLB) were among top performers. Communication Services (XLC) was the only sector closed in red. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All three major indexes hit record highs this week. Small companies index Russell 2000 performed the best with 6% weekly gains, new high since Jan 2022. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks gained as strong export data offset concerns about deflationary pressures. The Shanghai Composite Index(SSE) rose 0.72% and the blue chip CSI 300 registered modest losses for the week, SSE was down 0.59%, while CSI 300 added 1.2%. In Hong Kong, the benchmark Hang Seng Index gained 2.77%. (Refer to the above weekly performance table).

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

1.    China’s Exports exceeded forecasts in June, rising 8.6% from a year earlier, up from 7.6% growth in May. Analysts attributed the strength in overseas demand to manufacturers frontloading shipments ahead of potential tariff hikes from several major trading partners. The overall trade surplus increased to a multi-decade high of USD 99.05 billion from USD 82.62 billion in May. 

2.    China’s consumer price index rose a lower-than-expected 0.2% in June from a year earlier, narrowing from May’s 0.3% rise. Core inflation rose 0.6%, unchanged from May. The producer price index fell 0.8% from a year ago, marking its 21st month of decline, but eased from a 1.4% drop in May.

3.    China’s economic recovery has been uneven this year despite numerous measures to spur growth as a protracted property sector slump and weak domestic demand have restrained consumer prices. Many analysts have shifted focus to the Third Plenum on July 15, a three-day meeting of the Chinese Communist Party that is expected to unveil key economic policies for the coming years.

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index rally accelerated to 2.55% gain this week- 2^nd consecutive weekly gain over 2%, also its four-week up in a row. The index closed at its six-year new high since May 2018. SATS was the best index performer with 11.53% weekly gains and ThaiBev also had 10.23% gain. Rates sensitive stocks were among the top performers such as Mapletree PanAsia Com Tr(MPCT), Frasers L&C Tr(FLCT), CapitaLand Ascendas Reit(CLAR).

Click below for STI weekly chart.

STI weekly chart

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

Wall Street Closed All-Time Highs on Weak Jobs Data and Rate Cut Hopes

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

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

U.S.

For the shortened-trading week ended Jul 5, major U.S. indexes hit record highs in a broad-based surge Friday after relatively soft jobs data dragged down Treasury yields and raised hopes for a September rate cut. The technology-heavy Nasdaq Composite(COMP) ended the week 73.71% off its lows since the market began its rebound in mid- to late-2022, while the more value-oriented and narrowly focused Dow Jones Industrial Average(DJI) had gained less than half of that amount, 32.79%. The S&P 500 index(SPX) gained 59% in the same period.

Expectations for lower interest rates, fed by signs of weakening growth and easing inflation pressures, seemed to remain a major factor in favoring growth stocks by placing a lower implied discount on future earnings. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.    U.S economy in check: Manufacturing and services sectors fall into contraction. The two primary areas of the U.S. economy that have shown signs of moderation recently are the services sector and the labor market: The ISM Services index came in well below expectations for June with a 48.8 reading, reflecting a contraction in the non-manufacturing economy. June’s nonfarm jobs added 206k, below the previous month’s 218k, which had been revised lower by 54k. The U.S. unemployment rate also ticked higher from 4% to 4.1%, now above the Federal Reserve’s estimate of 4% for this year. 

2.    Inflation and rate cut: Inflation continues to moderate, and economy softens. the Fed will likely begin its interest rate-cutting cycle. According to CME FedWatch, the probability of a September rate cut has risen to about 72%, well above the 58% probability just last week, implying the Fed may undertake up to two rate cuts this year.

SPX sectors in play

Six out of the 11 sectors of SPX closed with gains for the week. Mega caps and other major tech and communications services sector stocks—topped the leader board, the rally included all but three growth sectors i.e Consumer Discretionary(XLY) , technology(XLK) and Communications Services(XLC). Meta Platforms (META) was the top-gaining mega cap, advancing more than 5% despite a lack of any specific stock-related news. Energy(XLE) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Both COMP and SPX hit all-time highs this week. DJI also closed at six-week high. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks fell as underwhelming manufacturing data reinforced concerns about the slowing economy. The Shanghai Composite Index(SSE) and the blue chip CSI 300 registered modest losses for the week, SSE was down 0.59%, while CSI 300 lost 0.88%. In Hong Kong, the benchmark Hang Seng Index gained 0.46% during a holiday-shortened week. (Refer to the above weekly performance table).

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

1.    China’s manufacturing sector shrank in June for the second consecutive month, government data showed. The official manufacturing purchasing managers’ index (PMI) reached 49.5 in June, unchanged from May, as new orders and exports declined. The nonmanufacturing PMI, which measures construction and services activity, rose to a below-consensus 50.5, down from 51.1 in May.

2.    The private Caixin/S&P Global survey of manufacturing activity edged up to a better-than-forecast 51.8 in June from 51.7 in May, marking its eighth monthly expansion. However, the Caixin services PMI was 51.2 in June, missing economists’ forecasts and slowing from 54 in May. The mixed PMI readings reflected the uneven performance of China’s economy this year amid a yearslong property slump that has hit domestic consumption and rising trade tensions that threaten the manufacturing sector. 

3.    The value of new home sales by the country’s top 100 developers fell 17% in June from the prior-year period, easing from a 34% decline in May, according to the China Real Estate Information Corp. The data boosted hopes that China’s housing market, now in its fourth year of a downturn, may start to gain traction after the government announced a sweeping rescue package in May.

 

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index rallied 2.34%- its 3^rd weekly consecutive gains. The index closed at more than two-year high- its highest since Apr 2022. The rally was led mainly by the three local banks. Overall, half of the 30-stock constituent index recorded weekly gains. Click below for STI weekly chart.

STI weekly chart

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