A 100% Chance to Cut Rate for Fed’s Sep FOMC

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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 Sep 5, U.S. equity indexes finished the holiday-shortened week higher. The latest August job’s data showed weaker-than-expected labor market, which fueled hopes that the Fed would lower short-term interest rates at its next meeting(Sep 16-17). However, sentiment shifted later in the day and stocks gave back their early gains, due in part to fears that rate cuts may not be enough to boost economic growth. 

The Nasdaq Composite(COMP) finished the week 1.14% higher, supported by shares of Apple and Google parent Alphabet, which both rose in the wake of an antitrust ruling that some investors viewed as less severe than expected. The S&P 500 Index(SPX) added 0.33%, while the Dow Jones Industrial Average(DJI) lost 0.32%. Refer to below major indexes weekly performance.

Major indexes monthly performance for the month of August.

Key highlights for the week and next:

1.    Weaker-than-expected labor market data. As reported on Friday morning, the closely watched nonfarm payrolls report revealed there were just 22k jobs added in August, a sharp decline from Jul’s revised figure of 79k and well below estimates for around 77k.  The CME FedWatch tool were pricing in a 100% chance of at least a 25-basis-point (0.25 percentage point) rate cut at the Fed’s next meeting(Sep 16-17), while the probability of a 50-basis-point cut rose from 0% to about 10% following Friday’s jobs report. 

2.    Manufacturing activity shrinks for sixth straight month; services sector expands. The ISM manufacturing PMI came in at 48.7% for August, up from July’s reading of 48% but below estimates for around 49.1%. Meanwhile, the ISM’s services PMI in August climbing to 52% from 50.1% in prior month. 

3.    Inflation data next week will be under spotlight. The Federal Reserve has two mandates – maximum employment and stable prices. The second mandate of inflation will come to the forefront once again next week. Investors will get both consumer price index (CPI) and producer price index (PPI) inflation figures for the month of August on Wednesday and Thursday next week, the last reading ahead of the September 17 FOMC meeting. 

SPX sectors in play

Six out of the 11 SPX sectors recorded weekly gains. Communication Services(XLC), Consumer Discretionary(XLY) and Health Care(XLV) sectors led the gains, while Financials(XLF) and Energy(XLE) 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 again, though both SPX and Nasdaq(COMP) edged up slightly and DJI recorded modest weekly loss. All three indexes weekly uptrend are still well intact. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland China stock markets declined as investors pocketed gains after a recent rally. The Shanghai Composite Index(SSE) fell 1.18% and the blue-chip CSI 300 lost 0.81%. In Hong Kong, the benchmark Hang Seng Index added 1.36%. (refer to the above weekly performance table).  

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

1.    China’s stock markets have surged since April, largely due to domestic liquidity rather than strong corporate earnings or an improving economy. The CSI 300 surged 10% in August, its best performance since a policy-driven rally last September, and it has climbed more than 20% from this year’s low. Average turnover volume rose to a record high in August, while the outstanding amount of margin trades rose to a record last week, Bloomberg reported, suggesting a strong appetite for risk-taking among retail investors. 

2.    Optimism about China’s advances in artificial intelligence and a government-led “anti-involution” campaign to cut overcapacity and discourage price wars in various industries have fueled sentiment. Analysts have also attributed recent gains to cash-rich households seeking higher returns amid low interest rates and a lack of compelling investment options. However, economic indicators have pointed to a broad slowdown in China’s economy, which is struggling with the threat of higher U.S. tariffs, a yearslong property downturn, and persistent deflation. Many economists believe that data in the coming months will confirm China’s growth slowdown and lead officials to roll out more stimulus to protect the economy amid the U.S.-sparked trade war. 

Refer to below Hang Seng Index stocks’ weekly performance table.

Click below for SSE and .HSI weekly chart.

SSE weekly chart

.HSI weekly chart

 

Singapore

The Straits Times Index (STI) added 0.88% to close at 4307.08 for the week- its first time cross 4300 level. It has been consolidated for the past six weeks and finally had bullish breakout to hit new record high.

YZJ ship, Genting SP and ST Engineering were among the top gainers of the week. Refer to below 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.