S&P 500 Rebound May Lead Nikkei 225 Higher, Hong Kong Trading Half-Day

S&P 500, NIKKEI 225, ASX 200 WEEKLY OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 indexes closed +1.65%, +2.44% and +3.13% respectively
  • Alphabet, Facebook and Amazon will report earnings this week, setting the tone for the broader market
  • RBA interest rate decision and US nonfarm payrolls report will also be closely monitored

US Tech Earnings, Nonfarm Payroll – Asia-Pacific Week-Ahead:

Wall Street stocks rebounded sharply on Friday, with the S&P 500 index, Dow Jones and Nasdaq 100 surging 1.65%, 2.44% and 3.13% respectively. Apple – The world’s single largest company by market cap – announced stellar quarterly earnings that beat markets estimates. Its share price jumped almost 7% to $170.33, pushing the broader tech benchmark higher. This also put this week’s US earnings, including Alphabet, Facebook and Amazon, in the spotlight. Nearly a quarter of the S&P 500 companies are due to report over the next few days, which will mark the peak of the earnings season.

So far, more than 33% of the S&P 500 companies have reported results. Among them, around 77% have beaten market estimates with an average earnings surprise of 4%, according to data compiled by Factset. Both of the companies that delivered positive surprises and the magnitude of the average earnings surprise have fallen slightly from the previous quarters, underscoring a tougher environment for corporates amid rising wage pressures and supply chain constrains.

This week’s US nonfarm payrolls data will test stocks again, as investors scrutinize the Fed’s view on wage pressures and the roadmap for tightening. Fed Chair Jerome Powell expressed hawkish-biased opinions during last week’s FOMC meeting, saying that the central bank will not rule out raising rates at every following policy meeting this year to contain rising price levels. His hawkish comments have ratted the market, sending risk assets sharply lower last week. Besides, the core Personal Consumption Expenditure (PCE) Price index hit a four-decade high of 4.9% YoY in December, slightly higher than economists’ forecast of 4.8%.

US Earnings Calendar

S&P 500 Rebound May Lead Nikkei 225 Higher, Hong Kong Trading Half-Day

Source: Bloomberg, DailyFX

APAC markets look set to kick off the week on a mixed tone, with futures in Japan and Australia pointing to a lower start. Those in Hong Kong, South Korea, Taiwan, Singapore, Malaysia, India and Thailand are in the green. Trading may be quieter than usual this week due to the Lunar New Year holiday. Mainland exchanges will be shut down from 31st January to 6th February. Hong Kong exchange will be half-day trading on Monday, and closed from 1st to 3rd February.

For the week ahead, Tuesday’s RBA and Thursday’s ECBinterest rate decisionsdominate the economic document alongside Friday’s US nonfarm payrolls report. Find out more from the DailyFX calendar.

Looking back to Friday’s close, 10 out of 11 S&P 500 sectors ended higher, with 86.6% of the index’s constituents closing in the green. Information technology (+4.33%), real estate (+3.38%) and communication services (+2.92%) were among the best performers, whereas energy (-0.60%) trailed behind.

S&P 500 Sector Performance 28-01-2022

S&P 500 Rebound May Lead Nikkei 225 Higher, Hong Kong Trading Half-Day

Source: Bloomberg, DailyFX

S&P 500 Index Technical Analysis

The S&P 500 index breached below an “Ascending Channel” as highlighted on the chart below, entering into a meaningful correction. Prices have likely found strong support near the October low of 4,300 and have since rebounded. Holding above this level may pave the way for a bullish trend reversal with an eye on 4,470 – the 200% Fibonacci extension. The RSI indicator rebounded from the oversold threshold, Suggesting that a technical rebound is underway.

S&P 500 Index – Daily Chart

S&P 500 Rebound May Lead Nikkei 225 Higher, Hong Kong Trading Half-Day

Chart created with TradingView

Nikkei 225 Technical Analysis:

The Nikkei 225 index breached below a “Symmetrical Triangle” pattern and thus opened the door for further losses. This suggests that prices are heading south after a few months of consolidation. Prices may be attempting for a rebound on Monday following a positive lead on Wall Street. The previous support level of 26,900 has now become an immediate resistance. The MACD indicator is trending lower below the neutral midpoint, suggesting that near-term momentum remains weak.

Nikkei 225 Index – Daily Chart

S&P 500 Rebound May Lead Nikkei 225 Higher, Hong Kong Trading Half-Day

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index breached below the floor of a range-bound zone between 7,200 to 7,500, entering into a consolidative phase. A bullish engulfing candlestick formed on Friday suggest that buyers are probably looking for bargain hunting opportunities, and prices may extend gain on Monday following a decent rebound on Wall Street.The RSI indicator rebounded from the oversold threshold, suggesting that near-term momentum has turned positive.

ASX 200 Index – Daily Chart

S&P 500 Rebound May Lead Nikkei 225 Higher, Hong Kong Trading Half-Day

Chart created with TradingView

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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