AI Unwind: Hot Inflation Fuels Rotation Into Defensives

For the week of Oct 16, global equities were driven by a rotation out of AI-linked technology and into defensive and value sectors as hotter-than-expected U.S. inflation revived rate-hike worries. In the U.S., semiconductor and AI-infrastructure stocks sold off on financing and return concerns while the Dow held up and Treasury yields eased. In China/Hong Kong, mainland markets underperformed as chip and AI shares fell, even as surging exports underscored strong overseas tech demand. In Singapore, the market edged higher as the MAS surprised with a policy hold and local banks steadied.

(Refer to the major indices' weekly performance tables below.)

 

Major Indices — Weekly Performance

Week 42, 17 Oct 2026

Symbol	Index Name	Close (Wk)	Change	Chg %	YTD %
$DJI	Dow Jones	52,002.41	+347.46	+0.67%	+8.20%
$STI	Straits Times	5,415.53	+13.64	+0.25%	+16.56%
$KLCI	KLCI	1,607.76	-0.69	-0.04%	-4.31%
$HSI	Hang Seng	24,186.83	-24.52	-0.10%	-5.63%
$SPX	S&P 500	7,659.44	-152.10	-1.95%	+11.89%
$SSE	Shanghai	3,716.28	-97.51	-2.56%	-6.36%
$RUT	Russell 2000	2,721.37	-85.61	-3.05%	+9.65%
$CSI300	CSI 300	4,170.61	-146.64	-3.40%	-9.92%
$N225	Nikkei 225	65,324.29	-3,706.63	-5.37%	+29.77%
$NDX	Nasdaq 100	29,187.55	-1,695.60	-5.49%	+15.59%

FJ · Market Wrap  |  sgtraderclub.blogspot.com  |  Data: S&P Capital IQWeek 42

🇺🇸 United States

Market Overview

U.S. equities posted their worst week since June as an AI-led sell-off hit growth stocks. The Nasdaq 100 (NDX) fell 5.49% and the S&P 500 (SPX) lost 1.95%, while the Dow Jones Industrial Average (DJI) rose 0.67%. The small-cap Russell 2000 (RUT) declined 3.05%, and the Russell 1000 Value Index beat its growth counterpart by more than 550 basis points as hotter inflation data and the start of third-quarter earnings season reinforced the rotation.

Index Weekly Performance

-       Dow Jones Industrial Average (DJI): +0.67%

-       S&P 500 (SPX): -1.95%

-       Nasdaq 100 (NDX): -5.49%

Key Highlights and Outlook

1️⃣ AI Financing Fears Trigger Sell-Off

Semiconductor and memory stocks came under pressure as investors scrutinised financing needs, valuations and returns on AI infrastructure spending. The SOX index fell for eight straight sessions from Oct 7 to Oct 16, and CoreWeave's credit-default swaps hit a record high. Micron and Intel slid further on Friday.

2️⃣ Inflation Surprises to the Upside

September CPI rose 3.7% year over year, above the 3.6% consensus, with core CPI at 2.6% and gasoline prices up 9.1% month over month. Producer prices were hotter still, rising 6.3% year over year versus an expected 5.4%, the largest annual gain since December 2022.

3️⃣ Fed Stays Noncommittal, Yields Retreat

Fed Chair Kevin Warsh offered little clarity on the October meeting, saying the central bank is no longer in the business of prejudging outcomes. CME FedWatch showed roughly a 17% chance of a hike, little changed on the week. The 10-year Treasury yield eased to about 5.09% from 5.24% as tech weakness drew demand for bonds.

4️⃣ Consumer Spending Firm, Labour Steady

September retail sales rose 0.8%, ahead of expectations, though a 6.4% jump in gas station receipts drove much of the gain. Control-group sales rose just 0.1% against an expected 0.3%. Initial jobless claims held at 199,000, the fifth straight reading below 200,000.

5️⃣ Energy and Defensives Take Leadership

Escalating Middle East tensions supported oil prices, giving the energy sector a tailwind. Defensive areas such as consumer staples and health care also gained as investors moved toward quality. Investment-grade bonds advanced, while high yield turned sharply risk-off after Wednesday's CPI report.

6️⃣ Earnings Growth Underpins the Backdrop

Third-quarter S&P 500 earnings growth is expected at about 29%, with 10 of 11 sectors forecast to grow, and the SPX is up 11.89% year to date. The Atlanta Fed's GDPNow tracks 3.6% annualised growth. Most mega-cap tech results fall between Oct 28 and Nov 2, a test of AI spending returns.

S&P 500 Sectors in Focus

Consumer Staples, Energy, Health Care and Materials posted the strongest weekly gains, with Utilities, Financials and Real Estate also finishing higher. Technology was the clear laggard and fell sharply as semiconductor and AI-infrastructure stocks sold off. Industrials, Consumer Discretionary and Communication Services also ended lower. Energy and Technology remain the year-to-date leaders despite the reversal.

(Refer to the SPX sector ETF weekly performance table below.)

S&P 500 Sector ETFs — Weekly Performance

Week 42, 17 Oct 2026

Symbol	Sector	Close (Wk)	Change	Chg %	YTD %
SPY ★	S&P 500 ETF	763.25	-15.32	-1.97%	+11.93%
XLP	Consumer Staples	87.62	+4.19	+5.02%	+12.80%
XLE	Energy	68.24	+3.16	+4.86%	+52.63%
XLV	Health Care	176.71	+5.90	+3.45%	+14.15%
XLB	Materials	50.92	+1.49	+3.01%	+12.28%
XLU	Utilities	42.21	+0.80	+1.93%	-1.12%
XLF	Financials	55.52	+0.79	+1.44%	+1.37%
XLRE	Real Estate	42.16	+0.55	+1.32%	+4.49%
XLC	Comm. Services	110.32	-0.06	-0.05%	-6.29%
XLY	Consumer Discret.	112.46	-0.39	-0.35%	-5.82%
XLI	Industrials	167.76	-1.49	-0.88%	+8.15%
XLK	Technology	183.47	-15.31	-7.70%	+27.44%

FJ · Market Wrap  |  sgtraderclub.blogspot.com  |  Data: S&P Capital IQWeek 42

Technical Snapshot

The SPX closed the week down 1.95% to 7,659.44 , its largest weekly loss since June, while the NDX dropped to 29,187.55, both SPX and NDX fell back into their sideway consolidation weekly range. The DJI index held at 52,002.41, appears on the opposite movement to SPX and NDX, it actually rebounded for 2nd week. With AI-financing worries and the Oct 28 Fed decision ahead, the chart structure remains a sideways consolidation for the SPX, which has traded largely flat since August.

📊 Weekly charts:

-       DJI weekly chart

-       SPX weekly chart

-       Nasdaq 100 weekly chart

 

🇨🇳 China / Hong Kong

Market Overview

Chinese equities declined, with mainland markets underperforming Hong Kong as selling in previously strong semiconductor and AI-related shares weighed on benchmarks. The CSI 300 fell 3.40%, the Shanghai Composite (SSE) declined 2.56%, and the Hang Seng Index (HSI) edged down 0.10%. Financials held up better than technology, and mainland shares recovered modestly on Friday on share buybacks, upbeat profit forecasts and gains in property.

(Refer to the major indices' weekly performance tables above.)

Index Weekly Performance

-       CSI 300: -3.40%

-       Shanghai Composite (SSE): -2.56%

-       Hang Seng Index (HSI): -0.10%

Key Highlights and Outlook

1️⃣ Chip and AI Shares Drag Markets

Semiconductor and other AI-related shares led the declines on renewed concerns about the scale and returns of AI spending, while stronger U.S. inflation revived interest-rate worries. In Hong Kong, Hua Hong Semiconductor fell 20.73%, Lenovo 14.56% and SMIC 9.11%. Analysts also cited mutual fund redemptions as added pressure.

2️⃣ September Exports Accelerate to Record

Exports rose 36.3% year on year in September, up from 25.0% in August and above forecasts, while imports grew 31.0%. The monthly trade surplus widened to a record USD 133.5 billion. Strong overseas demand for technology-related goods, including semiconductors and data-processing equipment, supported the gain.

3️⃣ Producer Inflation Jumps, Consumer Prices Lag

PPI rose 5.0% year on year in September, the fastest pace since June 2022, as energy and raw material costs climbed. CPI edged up to 0.9% from 0.8%, with core inflation unchanged at 1.0%. The data point to stronger producer-level price pressure without a comparable rise in consumer prices.

4️⃣ Maybank Securities Favours Defensive Resilience

Maybank Securities expects China's growth to stay subdued, with weak consumer demand and limited prospects for broad stimulus. It favours policy beneficiaries Lenovo(992.HK) and Zhongji Innolight (3308.HK), and defensive high-yield names China Mobile(941.HK)  and PetroChina(857.HK) . This week, China Mobile and PetroChina gained while Lenovo fell 14.56%.

5️⃣ Healthcare Splits After October Profit-Taking

The Hang Seng Healthcare Index fell 10.6% during 1-15 October, mainly on profit-taking, with Insilico, XtalPi, Akeso and WuXi Biologics the major laggards. This week WuXi Biologics fell 10.49% and WuXi AppTec 5.67%, while BeOne Medicines rose 7.35% and JD Health 6.87%.

Technical Snapshot

The HSI closed at 24,186.83, down 0.10% on the week and 5.63% lower year to date, while the SSE slipped to 3,716.28. Mainland benchmarks underperformed as the CSI 300 lost 3.40%, with semiconductor and AI-linked names leading the weakness and financials holding firmer. With third-quarter GDP and September activity data due on Oct 19, near-term direction will hinge on those figures and on whether AI-related selling eases.

Hang Seng Index Weekly Gainers

48 of 95 Hang Seng Index constituents gained on the week, and two closed unchanged. Consumer and healthcare names led, with Shenzhou International (+7.36%), BeOne Medicines (+7.35%), ANTA Sports (+7.30%), JD Health (+6.87%) and Meituan (+5.87%) topping the list. HSBC added 3.10%, while CCB and ICBC rose 1.34% and 1.20%.

(Refer to the Hang Seng Index constituents' weekly performance table below.)

HSI Constituents — Weekly Gainers

Week 42, 17 Oct 2026

Code	Company	Close (Wk)	Wk %	YTD %
HSI ★	HSI ★	24,186.83	-0.10%	-5.63%
2313	Shenzhou Intl	37.34	+7.36%	-38.99%
6160	BeOne Medicines	225.00	+7.35%	+25.49%
2020	ANTA Sports	77.95	+7.30%	-3.23%
6618	JD Health	38.56	+6.87%	-30.52%
3690	MeituanHMTD	75.70	+5.87%	-26.72%
1099	Sinopharm	15.72	+5.72%	-19.14%
9901	New Oriental	48.14	+5.71%	+13.97%
241	AliHealth	3.00	+5.07%	-40.50%
316	OOIL	160.60	+4.97%	+28.07%
27	Galaxy Ent.	33.54	+4.42%	-12.47%
2331	Li Ning	13.28	+4.08%	-28.87%
1876	Budweiser APAC	6.08	+4.02%	-19.89%
291	CR Beer	19.83	+3.66%	-24.37%
1519	J&T Global Express	9.30	+3.51%	-11.00%
9961	Trip.comHTGD	315.00	+3.48%	-43.14%
5	HSBCHSHD	149.70	+3.10%	+22.30%
2319	China Mengniu Dairy	18.80	+3.07%	+26.09%
1299	AIA Group	73.30	+2.88%	-8.26%
1209	CR Mixc	39.68	+2.80%	-7.59%
1038	CK Infra	67.95	+2.72%	+17.97%
1810	XiaomiHXXD	26.66	+2.70%	-32.16%
669	Techtronic	130.80	+2.59%	+45.49%
823	Link REIT	38.20	+2.36%	+9.96%
9999	NetEase	197.70	+2.17%	-7.88%
66	MTR Corp	32.38	+2.08%	+8.66%
1109	CR Land	31.06	+2.04%	+14.19%
3968	CM Bank	53.25	+2.01%	+0.85%
9988	AlibabaHBBD	108.80	+1.68%	-23.81%
857	PetroChinaHPCD	9.99	+1.68%	+19.27%
2688	ENN Energy	50.15	+1.52%	-27.53%
939	CCB	9.87	+1.34%	+28.28%
1044	Hengan	19.80	+1.28%	-29.03%
267	CITIC	12.87	+1.26%	+6.72%
1398	ICBC	7.59	+1.20%	+20.67%
3	HK & China Gas	7.21	+1.12%	+2.92%
12	Henderson Land	27.20	+1.12%	-3.34%
941	China MobileHCMD	80.95	+1.06%	-0.92%
2388	BOC Hong Kong	50.15	+0.95%	+27.22%
3692	Hansoh	31.74	+0.63%	-12.03%
9618	JD.comHJDD	106.10	+0.47%	-4.93%
2057	ZTO Express	158.30	+0.44%	-2.46%
300	Midea	93.95	+0.32%	+10.59%
1928	Sands China	11.49	+0.26%	-41.38%
883	CNOOC	23.96	+0.25%	+12.49%
6	Power Assets	60.55	+0.25%	+9.79%
3988	Bank of ChinaHBND	6.14	+0.24%	+37.67%
2015	Li Auto	44.76	+0.22%	-30.98%
2	CLP Holdings	77.15	+0.19%	+10.85%
1929	Chow Tai Fook	11.18	+0.00%	-9.77%
322	Tingyi	12.37	+0.00%	+4.92%

FJ · Market Wrap  |  sgtraderclub.blogspot.com  |  Data: S&P Capital IQ  |  Blue code = tradable on SGX as a Singapore Depository ReceiptWeek 42

Hang Seng Index Weekly Decliners

45 of 95 constituents declined. Semiconductor and technology hardware names bore the brunt, led by Hua Hong Semiconductor (-20.73%), Lenovo (-14.56%) and SMIC (-9.11%). WuXi Biologics (-10.49%), CATL (-10.30%), China Life (-9.71%) and Weichai Power (-9.15%) also fell sharply, while Tencent lost 1.65%.

(Refer to the Hang Seng Index constituents' weekly performance table below.)

HSI Constituents — Weekly Decliners

Week 42, 17 Oct 2026

Code	Company	Close (Wk)	Wk %	YTD %
HSI ★	HSI ★	24,186.83	-0.10%	-5.63%
2618	JD Logistics	10.27	-0.39%	-10.07%
836	CR Power	19.83	-0.50%	+14.56%
728	China Telecom	4.66	-0.53%	-13.54%
868	Xinyi Glass	8.11	-0.67%	-1.93%
688	COLI	13.17	-0.75%	+7.51%
386	Sinopec	4.50	-0.77%	-3.64%
968	Xinyi Solar	1.92	-0.78%	-35.35%
175	GeelyHGMD	15.01	-0.79%	-16.15%
1997	Wharf REIC	30.46	-0.85%	+23.92%
388	HKEX	374.60	-0.85%	-8.10%
762	China Unicom	5.62	-0.88%	-27.83%
9633	Nongfu Spring	41.20	-1.01%	-12.04%
1	CK Hutchison	65.90	-1.13%	+24.46%
6690	Haier	20.12	-1.47%	-17.13%
1113	CK Asset	44.50	-1.55%	+13.17%
16	Sun Hung Kai	107.20	-1.56%	+13.20%
700	TencentHTCD	417.80	-1.65%	-30.25%
288	WH Group	6.46	-1.97%	-25.55%
6862	Haidilao	9.37	-2.14%	-34.28%
1093	CSPC Pharma	8.88	-2.26%	+5.34%
1211	BYDHYDD	73.75	-2.45%	-22.65%
1024	KuaishouHKUD	29.30	-2.66%	-54.18%
1177	Sino Biopharm	5.25	-2.96%	-15.05%
2899	Zijin Mining	31.96	-2.98%	-10.38%
101	Hang Lung Prop.	6.40	-3.25%	-25.67%
2318	Ping AnHPAD	50.05	-3.47%	-23.18%
1088	China Shenhua	42.54	-3.80%	+9.64%
1801	Innovent Bio	89.05	-3.89%	+16.79%
9888	BaiduHBUD	79.45	-4.28%	-39.58%
2382	Sunny Optical	57.70	-4.63%	-11.98%
285	BYD Electronic	22.04	-4.84%	-34.48%
3993	CMOC Group	14.61	-5.19%	-24.06%
6181	Laopu GoldHLPD	318.60	-5.46%	-48.45%
960	Longfor	5.04	-5.61%	-41.06%
2359	WuXi AppTec	196.20	-5.67%	+98.78%
2600	Aluminum Corp China	7.27	-6.31%	-40.26%
9992	Pop MartHPPD	142.20	-6.63%	-24.24%
1378	China Hongqiao	19.64	-7.10%	-39.79%
981	SMICHSMD	52.40	-9.11%	-26.66%
2338	Weichai Power	25.42	-9.15%	+34.85%
2628	China Life	23.62	-9.71%	-13.73%
3750	CATLHCCD	440.80	-10.30%	-12.80%
2269	WuXi Bio	48.20	-10.49%	+53.31%
992	Lenovo	28.06	-14.56%	+203.02%
1347	Hua Hong Semi	74.95	-20.73%	+0.87%

FJ · Market Wrap  |  sgtraderclub.blogspot.com  |  Data: S&P Capital IQ  |  Blue code = tradable on SGX as a Singapore Depository ReceiptWeek 42

📊 Weekly charts:

-       SSE weekly chart

-       HSI weekly chart

 

🇸🇬 Singapore

Market Overview

The Straits Times Index (STI) edged up 0.25% as the MAS surprised with a policy hold and bank shares steadied. UOB rose 4.13% and DBS 1.02%, while OCBC was flat. Seatrium, UOL and Keppel led the decliners, and several REITs also weakened.

Index Weekly Performance

-       Straits Times Index (STI): +0.25%

Key Highlights and Outlook

1️⃣ MAS Holds Policy, Raises Growth View

The MAS unexpectedly kept the S$NEER slope at +125 bps per annum despite expectations for slight tightening. Maybank Securities noted that third-quarter GDP grew 5.4%, led by AI-driven manufacturing, trade and construction, and raised its 2026 GDP forecast to 5.6%.

2️⃣ Banks Steady After Recent Weakness

Maybank Securities noted Singapore banks had fallen 5% over six weeks on margin-squeeze and bond mark-to-market fears, but sees the yield impact as manageable and earnings as resilient. It stays positive on the sector, with OCBC the top pick and DBS the top technical pick.

3️⃣ Seatrium, UOL and Keppel Lead Losses

Seatrium fell 7.50%, UOL 4.40% and Keppel 3.99%, while Venture slipped 2.64%. REITs also weakened, including Mapletree PACT (-3.36%) and Keppel DC REIT (-2.82%). Outside the index, one broker attributed CSE Global's sharp drop to contagion from global AI and data-centre demand pessimism rather than company-specific news.

4️⃣ Deluge Debuts as AI-Themed SDRs Launch

Deluge listed on the SGX mainboard after its IPO was 3.86 times subscribed, with the public offer nearly 12 times covered at S$0.60 a share. SGX also launched five AI-themed SDRs on Friday, including TSMC and SK Hynix, tradable in Singapore dollars.

Technical Snapshot

The STI closed at 5,415.53, up 0.25% on the week and 16.56% year to date. Daily closes held in a narrow band between 5,403.50 and 5,430.50, as bank strength offset weakness in several REITs and property names. Immediate technical support around 5362 and resistance at around 5455 for near term, watch STI beyond these levls for clearer direction coming week. Absent a fresh catalyst, the outlook rests on whether the AI-led global sell-off and U.S. yields stabilise, with Singapore's September CPI due on Oct 22.

(Refer to the STI weekly performance table below.)

STI Constituents — Weekly Performance

Week 42, 17 Oct 2026

Code	Company	Close (Wk)	Wk %	YTD %
STI ★	STI ★	5,415.53	+0.25%	+16.56%
U11	UOB	41.61	+4.13%	+18.68%
D01	DFI Retail USD	3.29	+3.79%	-16.71%
BS6	YZJ Ship SGD	5.21	+2.16%	+49.71%
H78	HK Land USD	8.25	+1.85%	+18.71%
BUOU	Frasers L&C Tr	0.89	+1.72%	-11.06%
S68	SGX	21.00	+1.30%	+23.82%
D05	DBS	74.11	+1.02%	+31.49%
U96	Sembcorp Ind	5.92	+0.34%	-1.66%
M44U	Mapletree Log Tr	1.08	+0.00%	-18.18%
O39	OCBC	29.00	+0.00%	+46.76%
S63	ST Engineering	10.39	-0.29%	+23.40%
C38U	CapLand IntCom Tr	2.23	-0.45%	-6.69%
J69U	Frasers CT	2.06	-0.48%	-11.59%
C6L	SIA	6.53	-0.61%	+2.03%
G13	Genting Sing	0.61	-0.81%	-15.86%
C09	CityDev	7.04	-0.85%	-12.00%
A17U	CapAscendas REIT	2.17	-0.91%	-23.32%
Y92	ThaiBev	0.42	-1.16%	-7.61%
Z74	Singtel	4.18	-1.42%	-8.13%
J36	JMH USD	55.58	-2.03%	-18.73%
ME8U	Mapletree Ind Tr	1.79	-2.19%	-13.94%
9CI	CapLand Invest	2.38	-2.46%	-12.18%
V03	Venture	15.86	-2.64%	+4.76%
AJBU	Keppel DC REIT	2.07	-2.82%	-8.00%
F34	Wilmar	3.44	-3.10%	+11.69%
N2IU	Mapletree PACT	1.15	-3.36%	-21.77%
BN4	Keppel	10.10	-3.99%	-2.42%
S58	SATS	3.58	-4.02%	-6.04%
U14	UOL	7.61	-4.40%	-12.93%
5E2	Seatrium	1.85	-7.50%	-14.35%

FJ · Market Wrap  |  sgtraderclub.blogspot.com  |  Data: S&P Capital IQWeek 42

📊 Weekly charts:

-       STI weekly chart

 

📅 Week Ahead (19–23 Oct 2026)

U.S.: Earnings accelerate, with GE Aerospace reporting on Oct 20 before the open, Netflix after the close that day, Meta and Tesla after the close on Oct 21, and Procter & Gamble before the open on Oct 22. September housing starts and permits are due on Oct 20, followed by flash October PMIs and final University of Michigan sentiment on Oct 23. Markets will watch whether tech results ease or deepen AI-financing concerns, and how Treasury yields respond.

China/Hong Kong: China releases third-quarter GDP and September retail sales, industrial production and investment data on Oct 19, with a Reuters poll pointing to growth of about 4.4% year on year. The loan prime rate fixing follows on Oct 20, and the same poll expects rates to be held. Hong Kong traders will watch whether the semiconductor and AI sell-off steadies after the sharp falls in Hua Hong, SMIC and Lenovo.

Singapore/Regional: Singapore releases September CPI on Oct 22, after August headline inflation of 2.3%. UOL and CapitaLand Development preview the 1,268-unit Thomson Reserve from Oct 17, a gauge of new-launch demand after September home sales rose 16% year on year. OCBC reports third-quarter results on Nov 6 and UOB its trading update on Nov 4.

🗓️ Overarching Watchpoint

Whether the AI-led sell-off deepens into Meta and Tesla's results on Oct 21 will set the tone for the Fed's Oct 27-28 meeting, where a rate hike remains possible after hot CPI and PPI prints. A deeper sell-off would extend pressure on Asian semiconductor names, while stabilisation could slow the rotation into defensives.

 

Source: Some content and data are excerpted from publicly available market reports.

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