Stocks Climb Higher on Rate Cut Expectations and AI Boom

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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 12, most major U.S. stock indexes closed higher ahead of the Federal Reserve’s September 16–17 monetary policy meeting, at which the central bank is widely expected to lower short-term interest rates. Enthusiasm surrounding the ongoing artificial intelligence (AI) boom—supported by Oracle’s announcement of a substantial guidance increase amid several large new AI deals—also helped lift major indexes.

The Dow Jones Industrial Average(DJI), S&P 500 Index(SPX), and Nasdaq Composite(COMP) all notched new record highs during the week, although DJI and SPX both pulled back modestly in a relatively quiet trading session on Friday. Refer to below major indexes weekly performance.

Key highlights for the week and next:

1.    August inflation remains elevated but is seen as unlikely to derail rate cuts. Consumer price growth accelerated in August, with headline CPI rose to 2.9% YoY from July’s reading of 2.7%. Core CPI rose 3.1% over the same period. Meanwhile, producer price inflation resumed its trend lower, falling to 2.6%. 

2.    Downward revisions to job gains and higher initial jobless claims added to the recent trend of data pointing to a softening labor market. Latest reports showed 911k fewer jobs for the 12-month period through March 2025 than previously reported, compared with forecasts for 800k fewer jobs, also the Initial jobless claims rising to 263k in the past week, well above expected reading of 231k. Despite inflation remaining above the Fed's 2% target, investors are largely expecting the Fed to cut short-term interest rates at its upcoming meeting in support of its maximum-employment mandate. 

3.    Bond yields dropped on expectations of Fed easing, with the 10-year Treasury yield briefly touching 4.0%, matching the lows for the year reached in April. Lower rates should reduce borrowing costs for individuals and businesses, which would be supportive of the economy and corporate profits. Lower discount rates should help benefit equity markets near record highs with elevated valuations. 

SPX sectors in play

Nine out of the 11 SPX sectors recorded weekly gains. Tech(XLK) and Communication Services(XLC) were among the top gainers, while Consumer Staples (XLP) and Materials(XLB) lagged.

From a sector perspective, we recommend overweight positions in consumer discretionary, financials and health care. The consumer discretionary sector could continue to recover, supported by reduced tariff uncertainty and lower tax rates. Financial companies could benefit from less exposure to tariffs and the potential for a steeper yield curve as the Fed eases. Health care stocks trade at a discount to the broader market, likely reflecting the sector's challenges, but also offering the opportunity for valuation expansion. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three major indexes closed at record highs this week.  Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland China stock markets rose as bullish sentiment among retail investors persisted. The Shanghai Composite Index(SSE) rose 1.52% and the blue-chip CSI 300 added 1.38%. In Hong Kong, the benchmark Hang Seng Index advanced 3.82%. (refer to the above weekly performance table).  

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

1.    Ample domestic liquidity—as opposed to improving corporate earnings or economic data—has fueled a rally in China’s stock markets since April as cash-rich households seek higher returns amid low interest rates and a lack of better investing options. Recent advances in artificial intelligence and an official “anti-involution” campaign to cut overcapacity and discourage price wars in various industries have also boosted sentiment. On Thursday, the CSI 300 Index recorded its biggest one-day advance since March, Bloomberg reported, driven by domestic tech companies that are perceived to be major beneficiaries of Beijing’s push for homegrown technology. 

2.    Data showed that deflationary pressures continue to weigh on China’s economy. The producer price index fell 2.9% in August year on year, marking the 35th straight month that the gauge has remained in negative territory, but narrowed its decline from July’s 3.5% drop. The consumer price index turned negative for the first time in three months, falling a larger-than-expected 0.4% in August from a year ago, as food prices dropped. Unlike most Western countries, China is in its third straight year of deflation, and the government has been struggling to reverse price declines. But weak domestic demand due to a multiyear housing market downturn has made it difficult to engineer a long-term rebound in prices.

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) rose 0.86% to close at 4,344.24, marking its fourth consecutive week of gains. S-REITs continued to outperform as the downtrend in interest rates boosted their relative appeal. With bond yields easing, REIT distributions are increasingly attractive compared with government securities such as T-bills, which had previously been a popular choice for risk-averse investors.

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.