Stocks Continue Decline On Geopolitical and Interest Rate Concerns

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Key takeaways:

1.    The S&P 500(SPX) is down about 5.5% from recent highs, while the Nasdaq(COMP) is down around 7%, after a 28% rally in the S&P 500 over the past six months, a period of consolidation or some profit-taking was expected. 

2.    Corrections in the 5%-15% range are typical in any given year if not into a deep bear-market( with 20% or more losses). 

3.    Market expectation of Fed rate cuts reduced to one cut in 2024 from the six that were priced in at the start of this year. 

4.    Q1 earnings season is underway, mega-cap technology firms, including Microsoft, Google, and Meta will all be reporting earnings next week, with investors closely watching for signs of any weakness.

U.S.

For the week ended Apr 19, stocks recorded their third consecutive week of broad losses, as concerns over tensions in the Middle East and the possibility of U.S. interest rates remaining “higher for longer” appeared to weigh on sentiment. Both the SPX and COMP indexes fell a sixth-straight day, pushing SPX below 5000 on its weakest stretch in 18 months. The COMP ended at a three-month low. Mega-cap technology shares lagged as rising rates placed a higher theoretical discount on future earnings. Refer to below major indexes monthly performance table.

Key highlights for the week and next:

1.    Oil and commodity prices move slightly below recent highs as hopes rise for easing geopolitical tensions. WTI oil retreating to $82 per barrel from $87 (a high for the year) two weeks ago. However, spot gold price still very bullish, recorded its five-weeks gain nearly $2400 per ounce. 

2.    Fed signals rate cuts will wait in response to data. On Tuesday, Fed Chair Jerome Powell stated at an economic conference that “recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence.”  U.S treasury yields have moved higher as market expectations of Fed rate cuts have decreased. 

3.    Magnificent 7 stocks have corrected 8.4% as compared to SPX’s 5.5% retreat from recent highs. Magnificent 7 represented by Apple, Amazon, Alphabet, Meta Platforms, Microsoft, NVIDIA and Tesla. 

4.    Q1 earnings season is underway, mega-cap technology firms, including Microsoft, Google, and Meta will all be reporting earnings next week, with investors closely watching for signs of any weakness.

SPX sectors in play

For the week, four out of the 11 sectors of SPX closed positive. Growth and the interest-rate-sensitive parts of the market, including small-cap stocks and the real estate sector(XLRE), have pulled back more. Tech(XLK) and Consumer Discretionary(XLY) lagged. While Utilities(XLU) outperformed. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

SPX and COMP indexes declined for 3^rd week in a row, SPX back to its 20 weekly MA support level and COMP already dropped below it. SPX and COMP have pullback 5.5% and 7% respectively from their recent highs. The Magnificent 7 declined 8.4% from recent highs. The DJI index closed almost flat after two-week down. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks rose after the economy expanded more than expected in the first quarter.  The Shanghai Composite Index(SSE) gained 1.52%, while the blue chip CSI 300 added 1.89%. In Hong Kong, the benchmark Hang Seng Index gave up 2.98%. (Refer to the above weekly performance table).

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

1.   China’s gross domestic product expanded an above-consensus 5.3% in the first quarter from a year ago, accelerating slightly from the 5.2% growth in last year’s fourth quarter. On a quarterly basis, the economy grew 1.6%, rising from the fourth quarter’s 1.4% expansion.

2.    The People’s Bank of China injected RMB 100 billion into the banking system via its medium-term lending facility compared with RMB 170 billion in maturing loans and left the lending rate unchanged, as expected.Hang Seng Index stocks top weekly gains: ENN Energy(2688) +10.37%; China Hongqiao(1378) +9.28%;   

3.    China’s new home prices fell 0.3% in March, matching February’s 0.3% drop and extending losses for the ninth consecutive month, according to the statistics bureau.

Hang Seng Index component stocks weekly return(click on picture to enlarge):

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index closed on its 3^rd weekly decline with 1.26% loss this week. The index has been hovering around its 50dma and 200dma 3180 level last week. Immediate technical support 3140 and resistance 3200.

STI Index component stocks weekly return(click on picture to enlarge):

STI weekly chart

Source: Some contents and data excerpted from various public market reports.

Inflation Disappoints On The Upside In U.S. And On The Downside In China

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Key takeaways:

1.     A hotter-than-expected inflation report, alongside rising concerns of an Iranian retaliatory strike on Israel, sparked a bout of market indigestion last week. The Dow ($DJI) tumbled Friday to its lowest level since late January, the SPX ended at a four-week low.

2.   Gold price advances to new lifetime high to the $2400 neighbourhood. 

3.    WTI Crude Oil (/CL) futures earlier Friday spiked to a five-month high above $87 per barrel. 

4.    “Sell in May and go away” more often misses market gains based on historical data. 

5.    Q1 earnings started, more banks earning in coming week.

U.S.

For the week ended Apr 12, a hotter-than-expected inflation report, alongside rising concerns of an Iranian retaliatory strike on Israel, sparked a bout of market indigestion last week. Stocks moved lower, while interest rates and gold prices moved higher. The Dow ($DJI) tumbled Friday to its lowest level since late January, the SPX ended at a four-week low. Large-caps held up better than small-caps, with the Russell 2000 Index suffering its biggest daily decline in almost two months on Wednesday and falling back into negative territory for the year to date. Refer to below major indexes monthly performance table. 

Key highlights for the week and next:

1.    Latest inflation check. The primary factor weighing on sentiment appeared to be Wednesday morning’s release of the consumer price index (CPI) data, which showed headline prices rising by 0.36% in March, right in line with February’s increase, in contrast with consensus hopes for a small decline from the month-earlier pace. 

2.    Interest rate cut expectation. In the wake of the CPI report, futures markets began pricing in roughly a 20% chance of a rate cut at the Fed’s June policy meeting versus roughly 50% before its release. Markets expect the first cut will be pushed back to Jul, with fewer cuts this year. 

3.    Middle East conflict. Reports of possible imminent strike on Israel send investors flocking to oil and “safe heaven” Gold and U.S. dollar. Gold price advances to new lifetime high to the $2400 neighbourhood. WTI Crude Oil (/CL) futures earlier Friday spiked to a five-month high above $87 per barrel after The Wall Street Journal reported Israel is preparing for a direct attack from Iran as soon as Friday or Saturday. 

4.    Q1 earning report. Big banks such as JPM, Citi Wells Fargo(WFC) reported their quarterly result on Friday, JPM reported disappointed result and declined more than 6% on Friday. Other banks followed sell-off. Major bank earnings continue next week with Dow member Goldman Sachs (GS) expected to report results Monday. Bank of America (BAC) and Morgan Stanley (MS) are expected to report earnings Tuesday, along with Johnson & Johnson (JNJ) and UnitedHealth (UNH).

Sell in May and go away?

The antiquated saying is based on the notion that the stock market is weaker during the summer, but the data doesn’t confirm. “Sell in May and go away” more often misses market gains. That said, with May fast approaching, nearing the one-third mark for 2024, historical perspective is informative: Over the last four decades, the average return for the stock market from May to August was a respectable 3.4%, hardly a period worth missing.

SPX sectors in play

For the week, all 11 sectors in the SPX closed in red. Large-caps held up better than small-caps, with the Russell 2000 Index suffering its biggest daily decline in almost two months on Wednesday and falling back into negative territory for the year to date. Growth stocks such as Technology(XLK) and Consumer Discretionary(XLY) also fared better than value shares, which were weighed down by interest rate-sensitive sectors, such as real estate investment trusts (REITs), regional banks, housing, and utilities. Financial(XLF) was the worst performer. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three indexes retreated from their record level.  to their monthly new records. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks retreated as weak inflation data underscored the lackluster demand hanging over China’s economy. The Shanghai Composite Index(SSE) declined 1.62%, while the blue chip CSI 300 gave up 2.58%. In Hong Kong, the benchmark Hang Seng Index nearly flat losing 0.01%. (Refer to the above weekly performance table).

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

1.    China’s consumer price index rose a below-consensus 0.1% in March from a year earlier, down from February’s 0.7% rise. Core inflation rose by 0.6% but was weaker than February’s 1.2% increase. Meanwhile, the producer price index fell 2.8% from a year ago, marking its 18th month of declines and accelerating from February’s 2.7% drop. 

2.    China’s exports and imports fell in March and reversed gains from the first two months of the year. Exports shrank a worse-than-expected 7.5% in March from a year ago compared with a 7.1% rise in the January to February period. Meanwhile, imports dipped 1.9%, down from 3.5% growth in the first two months of the year. The latest results dealt a setback to China’s reliance on external demand to bolster its economy and added pressure on Beijing to ramp up stimulus measures as it tries to achieve its 5% annual growth target set at the National People’s Congress in March.

Hang Seng Index stocks top weekly gains: ENN Energy(2688) +10.37%; China Hongqiao(1378) +9.28%;  

Hang Seng Index stocks top weekly losers: AIA(1299) -9.41%; Li Ning(2331) -8.43%

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index nearly flat, losing 0.04% this week. The index continues hovering around resistance level 3250 in a narrow range. Immediate support 3200 and resistance 3250.

Top weekly gains: Jardine C&C +9.04%; Wilmar +2.31%;

Top weekly losers: YZJ -6.35%; Seatrium -3.57%

STI weekly chart

Source: Some contents and data excerpted from various public market reports.

Both China and U.S Manufacturing Picks Up for the First Time in Months

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Weekly Wrap Content for the week of Apr 5:

1. Week 14 major indexes performance;

2. Week 14 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S.

For the week ended Apr 5, U.S. three major indexes pull back from record highs on signs of manufacturing revival. The ISM’s service and manufacturing sector data seemed to play a particular role in driving sentiment over the week. Stocks moved lower following the release of the March ISM manufacturing reading on Monday, which came in well above expectations and indicated expansion for the first time in 16 months. Refer to below major indexes monthly performance table.

Key highlights for the week and next:

1.    Labour market is in very good shape, though its best days are behind it. Latest non-farm payrolls data for Mar as reported on Friday shows that employment conditions remain healthy, total 303k new jobs added, far better than expected 200k. 

2.    The unemployment rate ticked down slightly to 3.8%, its 26th consecutive month below 4%. 

3.    Latest ISM Manufacturing Index data as reported on Monday shows March PMI was 50.3, returning to expansionary territory for the first time since late 2022.   

4.   Fed Interest Rate Decision = Jobs conditions + Inflation Trend. It’s expected Fed would not cut rates until June at the earliest. Due to strong economic data reported recently, that timetable is challenged.

SPX sectors in play

For the week, nine out of 11 sectors in the SPX closed in red. Growth stocks faring better than value shares and large-caps falling less than small-caps. Energy(XLE) stocks outperformed as oil prices reached their highest level since October on worries over rising tensions between Israel and Iran and a decision by major exporters to maintain production limits despite tight markets. Some late strength in Microsoft also boosted the technology(XLK) sector. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three indexes retreated from their record level.  to their monthly new records. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China equities advanced in a holiday-shortened week, as data added to evidence that the economy could be gaining traction. The Shanghai Composite Index(SSE) added 0.92%, while the blue chip CSI 300 gained 0.86%. In Hong Kong, the benchmark Hang Seng Index rose 1.10%. Markets in mainland China were closed on Thursday and Friday in observance of the Qingming Festival, also known as Tomb Sweeping Day, when Chinese people honor their ancestors by cleaning and placing offerings on their tombs. Hong Kong markets were closed on Thursday but reopened on Friday. (Refer to the above weekly performance table).

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

1.    Manufacturing activity expands for first time in six months. The official manufacturing PMI rose to an above-consensus 50.8 in March, up from 49.1 in February. The nonmanufacturing PMI grew to a better-than-expected 53.0 from 51.4 in February. Separately, the private Caixin/S&P Global survey of manufacturing activity edged up to 52.7 in March, in line with expectations and marking its 15th month of expansion. 

2.    The People’s Bank of China said in its first-quarter policy report that it will intensify existing measures to encourage demand. The central bank pledged to maintain ample social financing and money supply to support Beijing’s annual growth target of 5% as it grapples with weak consumer confidence. 

3.    The value of new home sales by the country’s top 100 developers slumped 49% in March from the prior-year period, easing from the 60% drop in February, according to the China Real Estate Information Corp. Sales rose 93% from the previous month, but remained weak compared with the monthly average of the third and fourth quarters of last year. China’s tumbling property sales remain a drag on the key sector for its economy and have stoked a liquidity crisis among some of its biggest property developers as they struggle to meet loan repayments.

Hang Seng Index stocks top weekly gains: TRIP(9961) +8.5%; Zijin Mining(2899) +7.4%;  

Hang Seng Index stocks top weekly losers: Alibaba Health(241) -12%; JD Health (6618) -8.6%

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index pulled back after 4-week consecutive gains, down 0.18% this week. The index has been hovering around resistance level 3250 before dropping to test its 20dma level and rebounded on Friday. Immediate support 3200 and resistance 3250.

Top weekly gains: Seatrium+6.3%; MPACT +4.69%;

Top weekly losers: SingTel -5.14%; DFI -5.1%

STI weekly chart

Source: Some contents and data excerpted from various public market reports.

Stocks Close Out Strong Quarter With Gains

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Weekly Wrap Content for the week of Mar 29:

1. Week 13 major indexes performance;

2. Week 13 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S.

For the week ended Mar 29, U.S. three major indexes advanced over the shortened trading week to end a quarter of strong gains. The S&P 500 Index recorded new closing and intraday highs to end the week. As most central banks are eyeing the start of rate cuts in the months ahead, investors are hoping for a soft landing for the rally to continue. Markets were closed on Friday in observance of the Good Friday holiday. Refer to major indexes’ weekly performance table below.

SPX gained 3.1% for March, which marked the index's fifth consecutive monthly advance. The Dow Jones Industrial Average(DJI) rose 2.1%, and the Nasdaq Composite(COMP) added 1.8%. For the quarter, the three indexes rose 10.3%, 5.6%, and 9.2%, respectively. Refer to below major indexes monthly performance table.

Key highlights for the week and next:

1.    Market activity was generally subdued ahead of the holiday weekend, although volumes were expected to pick up to some degree as pension funds and other institutional investors rebalanced portfolios ahead of the quarter’s end. 

2.    Collapse of the Francis Scott Key Bridge in Baltimore on Tuesday morning cut off shipping access to the Port of Baltimore, one of the nation’s largest ports and its primary port for car and truck shipments. Economic implications of Baltimore port closure is yet to be known. 

3.    Personal Consumption Expenditures (PCE) price index, which is considered the Federal Reserve's preferred gauge of inflation, PCE latest reading for Feb released on Friday was in line with forecast.

SPX sectors in play

For the week, nine out of 11 sectors in the SPX closed with weekly gains. Small-caps also easily outperformed large-caps, and the Russell 1000 Value Index gained 1.79%, in contrast with the 0.60% decline in its growth counterpart. Communication services(XLC) and technology(XLK) shares underperformed, as the mega-cap technology stocks led by NVDA, AAPL, NFLX and META declined.  Utilities(XLU) and Financials( XLF) outperformed. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All the three indexes rise to their monthly new records. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China equities declined for the week as concerns about the continuing property sector downturn weighed on investor confidence. The Shanghai Composite Index(SSE) declined 0.23%, while the blue chip CSI 300 gave up 0.21%. In Hong Kong, the benchmark Hang Seng Index edged up 0.25%. (Refer to the above weekly performance table).   

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

1.    Chinese Premier Li Qiang told participants at the China Development Forum, an annual summit for global business leaders, that the country is open to foreign investment. Premier Li also pledged that the government will step up measures to support growth in several sectors, including biological manufacturing, artificial intelligence, and the data economy. Speaking at the same event, International Monetary Fund Managing Director Kristalina Georgieva said that China’s economy could expand a further 20% over the next 15 years if it conducts pro-market reforms. 

2.    Profits at industrial firms surged 10.2% in the January to February period from a year ago and recovered from a 2.3% decline in 2023, according to the National Bureau of Statistics, aided by policy support and increased overseas demand.

Hang Seng Index stocks top weekly gains: China Hongqiao(1378) +3.59%; Shenzhou(2313) +16.33%;

Hang Seng Index stocks top weekly losers: China Mengniu(2319) -13.93%; Sunny Optical(2382) -8.58%

Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index rose for 4^th consecutive week, gained 0.19% this week. It tested major resistance at 3250 level on Wednesday and retreated Thursday by profit-taking ahead of long weekends holiday. For the month of Mar, the index added 2.62%.

Top weekly gains: SATS +3.59%; YZJ Ship +2.69%;

Top weekly losers: HKLand -1.92%; CLI -1.83%

STI weekly chart

Source: Some contents and data excerpted from various public market reports.