U.S Stocks Declined on Inflation Fears and Political Uncertainties

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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 Jan 10, major stock indexes declined in the shortened week. Financial markets was largely negative after latest strong jobs data, which well above expectation. Government bond yields moved sharply higher, the higher yields weighed on stocks, particularly those with the highest valuations. The Nasdaq Composite fell 2.34%, its biggest weekly drop since mid-November. Refer to below major indexes performance table for the week.

Key highlights for the week and next:

1.    U.S Economy. December nonfarm payrolls came in at 256k, well above expectations of 165k, while unemployment rate fell to 4.1% from 4.2%. Wage gains continue to outpace inflation rate, a positive for consumers and sentiment. 

2.    Resilient labor market and hawkish Fed minutes indicate a slower pace for rate cuts. As a result, government bond yields moved higher last week, and stock market declined. In fact, according to the CME FedWatch tool, markets now expect just one more Fed rate cut in 2025. 

3.    Inauguration Day of the President-elect Trump is less than two weeks away on Jan 20. While the incoming administration has highlighted several policy initiatives – including tariffs, immigration and energy reform, deregulation and tax cuts – it remains to be seen which of these are prioritized in the weeks ahead. The uncertainty around which policies are prioritized, and in what order, may continue to remain an overhang on markets. 

SPX sectors in play

Three out of the 11 SPX sectors recorded weekly gain. Growth and high valuation stocks underperformed while defensive sectors such as Energy(XLE) and Health Care(XLV) stocks outperformed. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three major indexes declined in the week, SPX and Nasdaq dropped to their level in November. Dow went back down to its Oct level. Lower highs and lower lows seen on their daily charts which indicate a downtrend is formed on short term time frame though weekly chart still uptrend. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks fell as data showed that the economy remained stuck in deflation. The Shanghai Composite Index(SSE) lost 1.34%, while the blue chip CSI 300 gave up 1.13%. In Hong Kong, the benchmark Hang Seng Index fell 3.52%. (Refer to the above weekly performance table).

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

1.    Inflation data released Thursday showed that China is still grappling with deflationary pressures. The consumer price index rose 0.1% in December from a year earlier, in line with estimates and down from 0.2% in November amid lower food and fuel prices. 

2.   Separately, the private Caixin/S&P Global survey of services activity rose to a better-than-expected 52.2 in December, the highest level since May. The reading matched official data released the prior week showing that nonmanufacturing activity rose to 52.2 in December—the highest level in nine months—after Beijing rolled out a broad stimulus package in late September. 

3.   In a statement following its quarterly policy meeting, The People’s Bank of China said that it will implement a moderately loose monetary policy this year to support economic growth. The central bank pledged to increase financial support for the technology, emissions, pensions, and digital sectors. It also announced that it will reduce the reserve requirement ratio and interest rates when appropriate to boost consumption. 

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

SSE weekly chart

.HSI weekly chart

Singapore

The Straits Times Index (STI) inched lower 0.01% this week, closing at 3801.56 after hitting new record at 3886.98 intra-week. Three local banks were the top performers this week while the REITs were at the bottom of the performance table as shown below. Interest rates sensitive part of the markets was negatively affected by the sharply higher US bond yields.

Click below for STI stocks weekly performance table.

STI weekly chart

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