Stock Market Outlook for April 29, 2013
Upcoming US Events for Today:
- Personal Income and Spending for March will be released at 8:30am. The market expects Personal Income to show a month-over-month increase of 0.4% versus an increase of 1.1% previous. Consumer Spending is expected to increase by 0.1% versus an increase of 0.7% previous.
- Pending Home Sales for March will be released at 10:00am. The market expects a month-over-moth increase of 0.7% versus a decline of 0.4% previous.
- Dallas Fed Manufacturing Survey for April will be released at 10:30am. The market expects 5.0 versus 7.4 previous.
Upcoming International Events for Today:
- Euro-Zone Economic Sentiment for April will be released at 5:00am EST. The market expects –22.3, consistent with the previous report.
- German CPI for April will be released at 8:00am EST. The market expects a year-over-year increase of 1.4%, consistent with the previous report.
- Japan Industrial Production for March will be released at 7:50pm EST. The market expects a year-over-year decline of 7.2% versus a decline of 5.6% previous.
Recap of Friday’s Economic Events:
|CNY MNI April Business Sentiment Indicator||58.5||58.2|
|JPY Bank of Japan Rate Decision||0.10%||0.10%|
|EUR ECB Announces 3-Year LTRO Repayment||2.28B||11.0B|
|USD Gross Domestic Product (Annualized)||2.50%||3.00%||0.40%|
|USD Personal Consumption||3.20%||2.80%||1.80%|
|USD Gross Domestic Product Price Index||1.20%||1.30%||1.00%|
|USD Core Personal Consumption Expenditure (QoQ)||1.20%||1.10%||1.00%|
|USD U. of Michigan Confidence||76.4||73.5||72.3|
|CNY Industrial Profits (YTD) (YoY)||12.10%||17.20%|
Markets traded marginally lower on Friday, pressured by a disappointing report on Gross Domestic Product (GDP) in the US. GDP increased by 2.5% in the first quarter, short of estimates of 3.1%. The S&P 500 dipped by around two-tenths of a percent, holding around the all-time highs. The week ahead presents a critical week for equity markets as it relates to a fundamental, technical, and seasonal persepctive. From a fundamental standpoint, earnings reports continue in full force with 791 companies reporting quarterly results; 334 reports will be released on Thursday alone, the busiest day of this earnings season. As well, significant economic reports will keep investors on their toes with US employment reports for the month of April due to be released. And perhaps the most heavily watched events this week pertain to the central bank meetings in the US and Europe. The FOMC will deliver its regular rate announcement on Wednesday and the ECB on Thursday. The expectation is that central banks will remain accommodative given the recent dismal economic data. Speculation remains pronounced that the ECB will attempt to jump-start the faltering economy by enacting further stimulus, the result of which has lifted European stocks over the last few sessions in what might be perceived as complacency. The fundamental events this week will have the power to dictate the equity market trend for at least the next month.
From a technical perspective, resistance remains right overhead as presented by the all-time highs charted around three weeks ago. Last week the S&P 500 failed to chart a new weekly high, the second week in a row that the benchmark has been unable to do so. The last time the equity market failed to chart a new weekly high over a two week period was October/November of last year as the market declined by over 8% from a high of 1474 to a low of 1343. Should the equity market fail to chart a new high, the suggestion of a trend change may become confirmed as a lower-high and a lower-low on an intermediate scale will have been realized.
And finally, from a seasonal perspective, the average May 5th date is upon us, leading many to enact the strategy of "Sell in May." Between May 5th and October 28th, equity markets tend to show a directionless trend, on average, as favourable reoccurring fundamental influences conclude. Many of these tendencies failed to materialize at all this year, such as strength in manufacturing. Risk aversion has been prominent for many weeks, suggesting the early conclusion to the seasonal risk trade in equities and the start of the risk-off trade in defensive assets, such as bonds. A number of bond ETFs have outperformed the equity markets since the middle of March, a trend that is not seasonally typical until May. Evidence is mounting that the seasonal "Sell in May and Go Away" will grasp markets at any moment.
Seasonal charts of companies reporting earnings today:
Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.89.
S&P 500 Index
Chart courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Horizons Seasonal Rotation ETF (TSX:HAC)
- Closing Market Value: $13.38 (down 0.22%)
- Closing NAV/Unit: $13.41 (up 0.09%)
|2013 Year-to-Date||Since Inception (Nov 19, 2009)|
* performance calculated on Closing NAV/Unit as provided by custodian
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