Muted Reaction to NVDA’s Earnings, Inflation Held Steady

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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 Aug 29, U.S. equity indexes ended modestly lower on relatively light trading volumes as markets headed into a holiday weekend and the unofficial end of summer. (U.S. markets are closed Monday, September 1 for a public holiday.) Both the Nasdaq Composite Index(COMP) and S&P 500 Index (SPX) closed modestly lower. Meanwhile, the Dow Jones Industrial Average(DJI) logged a new record high during the week before losing ground on Friday, ultimately finishing the week lower.

For the week, much of the attention was focused on chipmaker NVIDIA’s(NVDA) earnings release. The world’s most valuable company by market capitalization reported results that generally beat FactSet consensus estimates, the numbers appeared strong enough to ease some recent concerns around the artificial intelligence-driven rally that has helped propel indexes to all-time highs this year. Refer to below major indexes weekly performance.

Key highlights for the week and next:

1.    Fed rate cut expectations in coming September meeting ( Sep 16-17) are shifting, with growing anticipation of interest rate cuts. This has sparked renewed interest and a rotation toward rate-sensitive sectors such as REITs.

2.    Inflation unchanged in July. Latest core personal consumption expenditures (PCE) price index reading- the Fed’s preferred measure of inflation, showed a 0.3% increase in prices month-on-month, roughly in line with June’s reading and consensus estimates. 

3.    All eyes were on NVIDIA — the world’s most valuable company and a bellwether for AI — as it reported earnings this season. Its significance is underscored by a staggering $4.2 trillion market capitalization, now accounting for 8% of the SPX. Given the stock’s outsized influence on the index and its remarkable rally (up 35% this year, following gains of 171% and 239% in the prior two years), NVIDIA’s quarterly results were among the most anticipated of this earnings season. The results were solid, but the stock reaction was muted. 

4.    Trump announces removal of Fed governor. Donald Trump announced that he would be firing Fed Governor Lisa Cook, citing allegations that she committed mortgage fraud. Cook filed a lawsuit seeking to block the firing on Thursday, and a spokesperson for the Fed said the central bank will abide by any court decision. 

5.    Gold has been in sideway consolidation for last four months and expected to have a bullish breakout above 3500 level(gold Dec future), SPDR Gold ETF(GLD) is one of our top picks with bullish view towards the end of the year. 

SPX sectors in play

Five out of the 11 SPX sectors recorded weekly gains. The energy(XLE), financial(XLF) and materials(XLB) sectors posted the biggest gains. Consumer Staples(XLP) and Utilities(XLI) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three major indexes were largely trading within their prior week’s range. Both the SPX and Nasdaq(COMP) will end the 4^th consecutive monthly gains for August. The indexes have extended it bullish thus far, be mindful for any profit-taking going forward as Sep and Oct have historically brought increased market fluctuations and softer returns. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland China stock markets advanced, extending a recent rally. The Shanghai Composite Index(SSE) advanced 0.84% and the blue-chip CSI 300 added 2.71%. In Hong Kong, the benchmark Hang Seng Index shed 1.03%. (refer to the above weekly performance table).  

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

1.    China’s stock markets have been on a tear in recent weeks. The CSI 300 has gained about 10% in August, ranking among the best-performing major indexes, and average daily turnover volume so far this month is on track for a record high, according to Bloomberg. Many analysts believe that ample domestic liquidity, rather than a strong economy, is fueling the rally as cash-rich households in China seek higher returns amid low interest rates and a lack of compelling investment options. The amount of margin debt taken out to buy stocks climbed to its highest level since 2015, according to Bloomberg, suggesting elevated retail interest in the stock market. 

2.    China reported that industrial profits fell a less-than-expected 1.5% in July, as strong tech sector earnings outweighed weakness in industries straining under weak demand and deflationary pressures. However, other indicators released earlier this month showed that China’s economy lost momentum in July as retail sales, factory activity, and fixed asset investment disappointed. Many economists believe that data in the coming months will confirm China’s growth slowdown and lead to officials rolling out more stimulus, possibly as soon as September, to cushion the impact of the U.S.-sparked trade war. Refer to below .HSI stocks performance of the week.

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

SSE weekly chart

.HSI weekly chart 

Singapore

The Straits Times Index (STI) added 0.39% to close at 4269.70 for the week, the index has continues its sideway consolidation since mid-Jul, and closed near top of the range.

The S-Reits sectors were among the top gainers of the week, in anticipation of the Fed’s September rate cut. Singapore’s latest 6-month T-bill yield fell to 1.44% as announced on Aug 28, it was the lowest level that yields have hit in the year to date and the 12th consecutive issuance since Mar 26 for which yields have declined. The decline treasury yield turning more investors to REITs which offer more attractive dividend returns in comparison. Refer to below table for STI index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

Source: Some contents and data excerpted from various public market reports. Please comment to claim copyright ownership of any material, and I will remove it if necessary.