SPX Hit New Highs on Solid Bank Earnings. Possible China Stimulus Ahead.

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly/month 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 of Oct 11, both the S&P 500 Index (SPX) and Dow Jones Industrial Average(DJI) moved to record highs, helped by some upside surprises to kick off earnings season. Shares in JPMorgan Chase(JPM) and Wells Fargo(WFC) rose on Friday after the banking giants reported smaller-than-feared declines in third-quarter profits, while the former managed a small increase in revenues. Refer to below major indexes performance table for the the week.

Key highlights for the week and next:

1.    Inflation modestly higher than expected. As reported on Thursday, both headline and core inflation in September a tick above expectation, which rose by 0.2% and 0.3% respectively. On a year-over-year basis, core prices increased 3.3% in September versus 3.2% in August, marking the first increase since March 2023. 

2.    While September inflation came in slightly hotter than expected, it's unlikely to stop the Fed from continuing its easing campaign, as it has now shifted its focus from inflation to the labor market. It’s expected quarter-point rate cuts at each meeting until Fed policy settles around 3% - 3.5%. 

3.    The CME FedWatch Tool shows a decent (14.1%) chance of the Fed keeping rates steady for the Fed’s next policy meeting in November. Minutes from the Fed’s last policy meeting released Wednesday, also revealed that several members preferred only a 25-basis-point (0.25 percentage points) rate cut. 

4.    The Q3 earnings season kicked off on Friday, with some of the big U.S. banks reporting better-than-expected results. Consensus expects earnings for the quarter to grow 4.2%, the fifth consecutive quarter of growth. A key trend to watch is whether an expected slowdown in earnings of the Magnificent 7 group of stocks coincides with a pickup in earnings growth from the rest of the market, or the S&P 493. 

SPX sectors in play

Six out of the 11 SPX sectors closed with gains for the week. Technology (XLK) outperformed, as a solid gain in NVIDIA(NVDA) shares compensate for a decline in Google parent Alphabet(GOOGL), following reports of a possible breakup of the company. Tesla was also weak following a skeptical response to the company’s highly anticipated unveiling of its new “robotaxis” and “robovans.” Utilities(XLU) shares lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three major indexes closed up for the week with each added more than 1%. Both the SPX and DJI closed at record new highs. Going forward, elevated valuations, geopolitical risks in the Middle East, and a tight U.S. presidential election could act as catalysts for short-term volatility.

Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks fell over a holiday-shortened week as optimism about Beijing’s stimulus measures waned. The Shanghai Composite Index(SSE) lost 3.56%, while the blue chip CSI 300 gave up 3.25%. In Hong Kong, the benchmark Hang Seng Index fell 6.53%. (Refer to the above weekly performance table).

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

1.    The National Development and Reform Commission(NDRC), the country’s economic planning agency, announced at a press conference on Tuesday that China would speed up countercyclical measures to support growth. The speech largely reiterated plans to boost investment and increase direct support to low-income groups and new graduates. Officials also stated that the central government will continue issuing ultra-long special sovereign bonds in 2025 to fund major projects and invest RMB 100 billion in strategic areas. 

2.    The People’s Bank of China launched a RMB 500 billion swap facility to provide liquidity to institutional investors to buy stocks, Bloomberg reported. Under the mechanism, the central bank will accept applications from nonbank financial institutions such as securities firms, funds, and insurers to obtain highly liquid assets, such as government bonds and central bank bills, if they provide certain collateral. The facility was part of a sweeping stimulus package announced by the central bank in late September that included interest rate cuts and other measures aimed at jumpstarting China’s economy. 

3.    Spending by Chinese consumers over the long holiday that ended Monday lagged pre-pandemic levels, Bloomberg reported, citing official data. Passenger traffic rose by 5.9%, while spending increased by 6.3% year on year. Box office sales totaled RMB 2.1 billion, down from RMB 2.7 billion reported a year earlier. However, average daily spending per trip was approximately RMB 131, up from RMB 113 during the five-day Labor Day holiday in May. 

4.    The highly anticipated briefing by China’s Ministry of Finance has wrapped up on Saturday Oct 13 - alas with no specific pledge of the 2 trillion yuan ($283 billion) in fresh economic stimulus that investors were hoping for in the lead up to the event. However, Policymakers offered clearer guidance on the focus of fiscal policy, vowing new measures to support the beleaguered property sector and to relieve the debt burden of local officials. Investors are turning their attention to the next meeting in the coming weeks of China’s top legislature, the National People’s Congress(NPC) Standing Committee, which has the power to approve more government bond sales. Investors and analysts expect China to deploy as much as 2 trillion yuan in fresh fiscal stimulus in order to shore up growth and boost confidence, a flash survey by Bloomberg shows.

Click below SSE and .HSI indexes for their weekly charts. 

SSE weekly chart

.HSI weekly chart

Singapore

STI index (STI) closed with a modest decline of 0.43% for the week. The index has been in sideways trading in the range of 3544- 3653 level over the past four weeks, while it hit new record of 3652.62 during this period. There were only five stock closed up among its 30 component stocks(refer to below STI index stock weekly return table). Overall, the index still in uptrend but in sideway consolidation mode right now, the healthy breather is essential for a bull market to continue.

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.