U.S. Stocks End Higher as Fed Signal Further Rate Cuts

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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 Oct 17, major U.S. stock indexes advanced, rebounding from a sharp sell-off on the prior Friday that saw the S&P 500(SPX) Index register its worst day since April. It was a volatile week for equity markets that started on a positive note after representatives from the U.S. and China appeared to walk back some of the prior week’s escalation of trade tensions. Some dovish comments from Federal Reserve officials and several deal announcements in the artificial intelligence (AI) space also appeared to support stock indexes early in the week. Refer to below major indexes weekly performance.

Key highlights for the week and next:

1.    After a six-month steady move higher, the S&P 500 rally faces challenges, including ongoing trade tensions between the U.S. and China, the ongoing U.S. government shutdown, and emerging concerns about small regional banks' credit quality. Market indicators, such as the rising VIX volatility index, and a shift toward safe-haven assets, like U.S. Treasuries, suggest some signs of investor fatigue. 

2.    Perhaps a primary source of uncertainty in recent weeks has been the ongoing tariff tit-for-tat between the U.S. and China. Trump has recently noted that the elevated tariff proposals on China were likely not sustainable, and he has also confirmed a meeting with Chinese President Xi later this month in South Korea. These recent developments have helped ease market concerns that the worst-case scenario around tariffs on China may not occur. 

3.    Latest consumer price index (CPI) inflation will be released on October 24, despite the U.S. government shutdown, which is expected to show that headline inflation inched higher to 3.1% annually, versus last month's 2.9% reading. 

4.    VIX volatility index, often referred to as the Wall Street fear gauge, has climbed above 20, after spending much of the last few months in the mid-teens. 

5.    Earnings season also began in earnest on Tuesday, with several big banks reporting third-quarter results. JPMorgan Chase, Citigroup, and Wells Fargo all reported better-than-expected results for the quarter. In total, about 12% of S&P 500 companies had reported as of Friday morning. Of those, 86% announced earnings that beat consensus estimates, according to data from FactSet, which seemed to help buoy investor sentiment during the week. 

6.    Fed Powell signals more rate cuts amid weakening labor market. FedWatch tool shows a 99% chance for 25 basis points(0.25%) rate cut in upcoming Oct 29 FOMC meeting. And 94% chance for another 25 basis points rate cut in Dec meeting. 

SPX sectors in play

All 11 SPX sectors recorded weekly gains. Consumer Discretionary(XLY) and Tech(XLK) led the gains, while Health care(XLV) and Financials (XLF) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three major indexes formed an inside weekly candlesticks, indicate indecisive on market direction. For SPX, a breakout beyond the recent big black candle’s range (6765-6550) would provide clearer direction, with upside bias. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland China stock markets fell as trade tensions with the U.S. intensified. The Shanghai Composite Index(SSE) slid 1.47% and the blue-chip CSI 300 fell 2.22%. In Hong Kong, the benchmark Hang Seng Index fell 3.97%.

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

China reported that factory gate prices fell 2.3% in September year on year, the 36th straight month of declines, though the pace of decline slowed from August’s 2.9% drop. Consumer prices declined 0.3%, steeper than economists’ median forecast. On the bright side, the core consumer price index, which excludes food and energy, rose to a 19-month high of 1.0%. The latest inflation data showed that deflationary pressure continues to stalk China’s economy, which is struggling with falling prices since the pandemic ended and a prolonged housing market slump that has further weakened consumer demand.

Analysts are eyeing China’s fourth plenum, a high-level political meeting of Communist Party officials scheduled for October 20 to 23. During the meeting, officials are expected to deliberate and approve a proposal from top leaders on China’s next five-year plan laying out the country’s economic and social development goals. Analysts will be watching for any comments regarding domestic consumption, which officials have previously signaled would be a priority as they try to rebalance China’s economy in the face of higher U.S. tariffs.

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) declined 2.22% to close at 4328.93 this week. Immediate technical support level to watch for coming week is around 4300-its 50dma level. 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.