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.