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.