Week Ahead, 9 Sept, 2024
Broadcom Inc's earnings fell short of the expectations of the AI investing community. Not only did the stock decline by 10.36%, but tech-related stocks and the NASDAQ 100 also experienced significant losses, with the latter dropping by 2.69%. The selling pressure was exacerbated by the August US non-farm jobs report, which came in at 142,000, below Wall Street's forecast of 160,000.
Additionally, we observed a normalisation of the yield curve after a prolonged period of inversion. Investors are somewhat concerned about this development, as it has often signalled an impending US recession. However, we remain open-minded, noting that the yield curve inversion in 2022 did not lead to a recession.
Given this week's performance, S&P 500 is now consolidating in a lower highs trend, non-bullish observation, but stayed above key support levels. Thus, we have adjusted our stance on the US equities market from bullish to neutral.
China stocks also faced challenges, with the China A50 falling below our critical 61.80% retracement level, reducing the likelihood of a rally or recovery at this point. Major investment houses, UBS Wealth Management and JP Morgan, too have downgraded their ratings on the China market from bullish to neutral. However, we are not entirely dismissing the Chinese market and continue to monitor developments, as policy changes or data shifts could lead to a reversal of analyst sentiment and technical trends.
Alibaba Inc (HK) is poised to begin its stock connect trading as early as Monday, potentially attracting significant inflows from a potential pool of 220 million Chinese Mainland investors.
Other notable news includes Dell Technologies and Palantir joining the S&P 500 Index and Singapore's plans to begin construction of Terminal 5 in early 2025, aiming for operational status around 2035. This development is expected to boost the tourism and travel sector.
While we may see some short-term rebounds, we remain cautious about the equities markets for the coming week until we observe significant changes in the technical observations.
Headlines for the week:
- Corp Earnings
- US Aug CPI, PPI
- China Aug CPI, Trade
Disclaimers apply