U.S Stocks V-shape Rebounded on Cooling Inflation and Strong Bank Earnings

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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 17, major stock indexes finished higher, rebounding from a sharp sell-off at the end of the prior week. The financials sector posted strong weekly gains, aided by some upside surprises to kick off earnings season. Shares of JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo all rose after the banking giants reported surges in profits during the fourth quarter. U.S market will close on Monday for a public holiday. Refer to below major indexes performance table for the week.

Key highlights for the week and next:

1.    Bond yield and inflation: In the week, the benchmark 10-year Treasury yield briefly touched a 14-month high at 4.8% before retreating following encouraging inflation data. December Core CPI unexpectedly edged lower to 3.2% from 3.3%, the first drop since July, providing relief to both stocks and bonds. Without the Fed going back to tightening mode, it’s believed yields may not move sustainably higher from here or exceed the prior cycle peak of almost 5% reached at the end of 2023. 

2.    Q4 Earnings under spotlight. The banks kicked off the earnings season last week, delivering strong results and pointing to a favorable macroeconomic environment. More broadly, S&P 500 earnings are expected to increase 11% in the fourth quarter from a year ago, which would represent the strongest growth in three years. If S&P 500 earnings grow by 10% or more in 2025 as analysts expect, stocks can advance even after a modest decline in valuations (in this example the price-to-earnings ratio would need to fall below 19.5 from 21.5 currently to fully offset the gains from rising profits). 

3.    President Inauguration Day on Monday. Policy headlines will likely dominate the narrative after Inauguration Day, with markets likely attempting to calibrate expectations for growth and inflation based on what's announced.

 

SPX sectors in play

All the 11 SPX sectors recorded weekly gain. Energy(XLE) and Financials(XLF) outperformed, while Health Care(XLV) lagged. As measured by Russell 1000 indexes, value stocks outperformed growth shares by the widest weekly margin since September, driven in part by outperformance in the energy sector amid higher oil prices and some profit-taking in large-cap technology stocks. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three major indexes rebounded sharply and recovered their previous week’s losses. SPX index closed highest in four weeks, SPX and Nasdaq rebounded above their major daily Moving Averages 20, 50 and 200dma. DJI also closed at four-week high. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks rose as the economy improved despite persistent deflationary pressures. The Shanghai Composite Index(SSE) added 2.31%, while the blue chip CSI 300 gained 2.14%. In Hong Kong, the benchmark Hang Seng Index was up 2.73%. (Refer to the above weekly performance table).

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

1.    China’s GDP expanded a better-than-expected 5.4% in the fourth quarter from a year earlier, surpassing the 4.6% growth in the third quarter. On a quarterly basis, the economy grew 1.6%, up from a revised 1.3% gain in the prior quarter, while GDP for the year reached 5%, hitting Beijing's annual growth target. 

2.    Other data also showed signs of recovery. Industrial production rose an above-forecast 6.2% in December from a year earlier, up from November’s 5.4% increase, partly due to higher auto, computer, and solar cell sales. Retail sales grew 3.7% in December from a year earlier, up from a 3% increase in November. Fixed asset investment was 3.2% in the January to December period from a year ago, down slightly from a 3.3% rise in the prior month. Property investment declines deepened to 10.6% year on year, while the unemployment rate ticked up to 5.1%. 

3.    Property slump stabilizes. New home prices in 70 cities were flat in December from November, improving from a 0.1% dip in November, according to the National Bureau of Statistics. December’s figure marked the fourth month of slower declines, Bloomberg reported. 

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

SSE weekly chart

.HSI weekly chart

Singapore

The Straits Times Index (STI) edged higher 0.24% this week, closing at 3810.78 level. Seatrium, Sembcorp and SingTel are among the top gainers, while HKland and YZJ lagged. Refer to below STI stocks weekly performance table.

Click below for STI weekly chart.

STI weekly chart

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