The S&P 500 and the Nasdaq Composite fell on Friday and posted their second straight weekly losses, as hotterthan-expected U.S. producer prices data pushed Treasury yields higher and sank rate-sensitive megacap growth stocks. The U.S. government reported that the producer price index (PPI) climbed 0.8% in the 12 months leading to July, up from a 0.2% rise in the previous month, as costs of services increased. Economists polled by Refinitiv had expected a 0.7% gain. Though traders broadly expect the Federal Reserve to refrain from tightening credit conditions for the rest of the year, bets for no rate hike in September slipped to 88.5% from 90% before the PPI data landed. Yield on the two-year U.S. Treasury note, that moves in line with near-term interest rate expectations, climbed to 4.88%. This move weighed on big tech names, as high interest rates could slow the economy and dent the ability of these firms to achieve the growth projections which have pushed them to premium valuations. Higher rates can also make interest-bearing bonds an attractive alternative to stocks for some risk-averse investors. Megacap growth and technology stocks have led outsized gains this year in the tech-heavy Nasdaq and the S&P 500. But after a five-month stretch of advances, August has so far been marked by a more cautious approach from investors. Amid the major S&P sectors, healthcare and energy sectors advanced. Both have been among the worst performing industries this year, although energy matched its strongest run this year by closing higher for the seventh straight session. The energy sector’s 1.6% increase was aided by crude prices rising on forecasts for tightening supplies from the International Energy Agency. Speaking of continental Europe, the UK released June GDP data that grew 0.8% yoy and 0.5% mom, higher than expected; and confirmed second quarter GDP at 0.4% yoy & 0.2% mom, both higher than forecast and previous quarter. No wonder June UK Industrial Production managed to crawl to 1.8% mom, even reversing the previous month’s negative 2.1% to 0.7% yoy. Similarly, Manufacturing Production turned into positive growth territory of 3.1% yoy in June after posting minus 0.6% in May. From the Asian continent, China reported New Loans (July) fell to 345.9 billion Yuan, much lower than expectations of 800 billion Yuan and the previous month’s massive 3.05 trillion Yuan. Last but not least, last Friday the University of Michigan released the Michigan Consumer Sentiment & Current Conditions outlook in August which gives a more optimistic picture of the US economic situation for the next 6 months.
JCI closed last week in the red at 6879.98 partly due to a foreign sell-off of IDR 252.66 billion, although their weekly position is still relatively safe at IDR 2.06 trillion (RG market). In this position, Indonesian capital market investors/traders are advised to wait further for the breakout direction of the selected Support or Resistance, before deciding on further investment steps.
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