U.S Stocks Continue “V-Shape” Recovery from Aug 5 Sell-Off

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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 Aug 16, major U.S. indexes recorded a solid week of gains, as investors appeared to celebrate positive news on both the inflation and growth fronts, which together bolstered hopes that the economy might achieve a “soft landing.” The technology-heavy Nasdaq Composite(COMP) led the gains and ended the week up 12.24% off its intraday lows amid the sell-off on August 5.

The S&P 500(SPX) rebounding by over 6.5% and the 10-year Treasury bond yield, which had gotten as low as 3.66% during the market volatility, since climbing to about 3.9%, signaling some return of confidence in the broader economy. In addition, the VIX volatility index, known as “Fear Index”, climbed as high as 65 on August 5, its highest since 2020, but has since come back down to under 15, in line with the average over the past year. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.    Inflation data continues to moderate, with both consumer price index (CPI) and producer price index (PPI) inflation coming in softer than expected for the month of July. Headline PPI inflation came in at 2.2% annually, below forecasts of 2.3%, while headline CPI inflation came in at 2.9%, also below expectations of 3.0% 

2.    Economic data better than expected. Both retail sales and jobless claims coming in better than forecast. The monthly retail-sales growth came in at 1%, well above the forecasts for 0.4% and last month's -0.2%. Most recent Jobless claims at 227k, which have come in steadily lower. These measures point to a U.S. economy that may be cooling but certainly not on the precipice of a sharp downturn or recessionary environment. 

3.    It’s expected the Fed that will likely begin cutting rates as soon as the September 18 FOMC meeting. Coming week's annual Fed Jackson Hole Symposium will be closely watched (August 22-24), as Fed Chair Jerome Powell and team may use this as an opportunity to signal the first Fed rate cut.

 

SPX sectors in play

All 11 sectors of SPX closed with gains for the week. The recovery has once again been led by the technology(XLK) and growth sectors, which had also been down the most during the recent pullback. Artificial intelligence chip giant NVIDIA was especially strong, gaining 18.93% over the week.  Growth stocks handily outpaced value shares.

Consumer discretionary(XLY) stocks also performed well, with Starbucks(SBUX) surging 24.50% on Tuesday on news that it was replacing its CEO with one credited with engineering a turnaround at Chipotle(CMG). Likewise, Walmart(WMT) gained 6.58% on Thursday following its earnings report, which beat consensus expectations. The company also surprised analysts by raising its profit and revenue outlook for the remainder of the year. Shares of Google parent Alphabet(GOOGL)fell at midweek, however, following reports that the Justice Department was investigating breaking up the company, which would mark the largest such action since AT&T(T) was dismantled in the 1980s. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

The major indexes continue its rebound and recovered most of its recent losses. The SPX is just 2% below its high 5 weeks ago. All three indexes uptrend is well intact. 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 activity. The Shanghai Composite Index(SSE) gained 0.6% and the blue chip CSI 300 added 0.42%. In Hong Kong, the benchmark Hang Seng Index was up 1.99%. (Refer to the above weekly performance table).

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

1.   July data highlighted weakness in China’s economy. Industrial production rose a below-consensus 5.1% in July from a year earlier, slowing from June’s 5.3% increase, partly due to lower auto sales. Retail sales expanded a better-than-expected 2.7% in July from a year earlier, up from a 2% increase in June. Fixed asset investment rose 3.6% in the January to July period from a year ago, lagging forecasts, while property investment fell 10.2% year on year. The urban unemployment rate edged up to 5.2% from 5% the prior month. 

2.    New bank loans rose a weaker-than-expected RMB 260 billion in July, down sharply from RMB 2.13 trillion in June, while loan growth in July slowed to 8.7% year on year. July’s weak credit data raised speculation that the central bank may cut interest rates further to fuel demand as China’s prolonged property market slump continues to hit consumer confidence. 

3.    New home prices in 70 cities fell 0.7% in July, unchanged from the pace of declines in the prior two months and marking the 13th straight monthly drop, according to China’s statistics bureau. While data suggested that the government’s property rescue package introduced in May has spurred demand in major cities, buying interest remained sluggish in smaller towns, according to Bloomberg.

SSE weekly chart

.HSI weekly chart

Singapore

STI index rallied 2.79% this week after 4-week down streak. The index tested its 200dma recently and bounced back strongly since then, led by the local banks and other blue chips. 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.