U.S. Equities Consolidate as Inflation Cools; BoJ Hikes Rates

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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 Dec 19, major U.S. indexes finished the last full trading week of the year mixed, as investors navigated noisy but generally encouraging macro data and continued rotation beneath the surface. The Nasdaq Composite (COMP) outperformed, gaining 0.48%, while the S&P 500 Index (SPX) ended the week largely unchanged. In contrast, the Dow Jones Industrial Average (DJI) declined 0.67%, and the Russell 2000(RUT) underperformed, falling 0.86%.

U.S. equities started the week on a weaker note amid concerns over technology valuations, AI-related capital spending, and mixed economic data, but sentiment improved toward week’s end following a cooler-than-expected inflation report and strong earnings from Micron Technology. As 2025 draws to a close, markets have delivered solid double-digit year-to-date gains, supported by easing inflation pressures, resilient earnings, and expectations that the Federal Reserve is nearing the end of its tightening cycle. Refer to the table below for the major indexes' weekly performance.

Key highlights for the week and next:

1.    Inflation surprised to the downside

November CPI cooled more than expected, with headline inflation easing to 2.7% and core CPI slowing to 2.6%, the lowest level since early 2021. 

2.    Labor market remains soft but stable

Nonfarm payrolls rose 64k in November, rebounding from October’s government-driven decline. Hiring remained concentrated in healthcare and construction, while the unemployment rate increased to 4.6%, reflecting a gradually cooling labor market rather than outright deterioration. 

3.    Business activity shows signs of slowing momentum

The Flash U.S. Composite PMI eased to 53.0, a six-month low, indicating slower growth across both manufacturing and services. Businesses appeared more cautious on hiring, citing a more challenging operating environment. 

4.    Fed bias remains toward gradual easing

Cooling wage growth and softer hiring trends reinforce expectations that the Fed maintains a measured easing bias in 2026, despite inflation remaining above its 2% target. Markets continue to price in limited rate cuts rather than aggressive policy easing. 

5.    Market leadership continues to broaden

Elevated mega-cap tech valuations and improving earnings momentum elsewhere have supported rotation into mid-caps, cyclicals, and non-tech sectors, while large-cap technology names took a breather following recent earnings disappointments. 

6.    Bank of Japan tightens policy further

The Bank of Japan raised its benchmark interest rate to the highest level in 30 years, highlighting ongoing normalization in Japanese monetary policy and underscoring diverging global central bank paths as major economies move through different stages of the policy cycle.Fed delivers third straight rate cut, signals flexibility

SPX sectors in play

Five of the 11 S&P 500 sectors ended the week higher, with growth and technology-related stocks outperforming. Consumer Discretionary (XLY) and Technology (XLK) led gains, while Energy (XLE) and Consumer Staples (XLP) lagged.

Looking into 2026, cyclical sectors, small- and mid-cap companies, value-style investments, and international equities trade near their historical average valuations and stand to benefit from improving liquidity conditions and better credit availability. Refer to the SPX sector ETF weekly performance table below. 

Indexes technical levels

SPX closed within its three-week consolidation range after a volatile week- it dipped below its 20dma on Wed but fully recovered on Friday after better-than-expected CPI data. Click below three indexes for their weekly charts.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

Mainland China stock markets ended the week on a mixed note, weighed by a trio of indicators underscoring lacklustre growth in the economy. The Shanghai Composite Index(SSE) edged up 0.03% and the blue-chip CSI 300 lost 0.28%. In Hong Kong, the benchmark Hang Seng Index fell 1.10%.

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

1.    Retail sales rose 1.3% in November from a year earlier, the slowest pace since the pandemic, Bloomberg reported, citing data from China’s National Bureau of Statistics. Fixed asset investment fell 2.6% in the first 11 months of the year, lagging economists’ estimates and putting the measure on track for its first annual contraction in data going back to 1998. Industrial output also trailed forecasts and grew 4.8% year on year, underscoring the importance of China’s export sector in driving the economy as domestic demand languishes. 

2.    The latest retail sales data showed that consumption remains a weak spot in China’s economy despite the government’s efforts to stimulate demand. Earlier in December, China’s leaders signaled that they would refrain from ramping up stimulus next year even as they pledged to support growth. China will “flexibly and efficiently” use interest rate and reserve requirement cuts to ensure liquidity and maintain a “necessary” level of budget deficit and spending in 2026, according to a readout following the Central Economic Work Conference, an annual meeting of government officials that lays out the next year’s economic agenda. Analysts interpreted the readout as a sign that Beijing would stick with its current manufacturing-led growth strategy as it takes steps to boost consumption. 

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) fell 0.36% this week to close at 4569.78, retreat by  profit-taking after hitting intra-week new record. Rate sensitive stocks such as developers, REITs led the gains. Trading activity was typically subdued amid the school holidays and year-end festive period. 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.