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Stock Market Outlook for May 1, 2013

Todays_Markets

Upcoming US Events for Today:

  1. Motor Vehicle Sales for April will be released throughout the day.
  2. ADP Employment Report for April will be released at 8:15am.   The market expects 155,000 versus 158,000 previous.
  3. PMI Manufacturing Index for April will be released at 8:58am.   The market expects 52.0 versus 54.6 previous.
  4. ISM Manufacturing Index for April will be released at 10:00am.   The market expects 51.0 versus 51.3 previous.
  5. Construction Spending for March will be released at 10:00am.   The market expects a month-over-month increase of 0.6% versus an increase of 1.2% previous.
  6. Weekly Crude Inventories will be released at 10:30am.
  7. The FOMC Meeting Announcement will be released at 2:00pm.

 

Upcoming International Events for Today:

  1. Great Britain Manufacturing PMI for April will be released at 4:30am.   The market expects 48.5 versus 48.3 previous.
  2. China HSBC Manufacturing PMI for April will be released at 9:45pm EST.   The market expects 50.6 versus 51.6 previous.

 

Recap of Yesterday’s Economic Events:

Event Actual Forecast Previous
JPY Housing Starts (YoY) 7.30% 6.00% 3.00%
JPY Annualized Housing Starts 0.904M 0.890M 0.944M
EUR German Retail Sales (YoY) -2.80% -1.20% -2.60%
EUR German GfK Consumer Confidence Survey 6.2 5.9 6
EUR German Unemployment Change 4K 2K 12K
EUR German Unemployment Rate s.a. 6.90% 6.90% 6.90%
EUR Italian Unemployment Rate (SA) 11.50% 11.70% 11.50%
GBP Net Consumer Credit 0.5B 0.5B 0.5B
GBP Net Lending Sec. on Dwellings 0.4B 0.6B 0.8B
EUR Euro-Zone Consumer Price Index Estimate (YoY) 1.20% 1.60% 1.70%
EUR Euro-Zone Unemployment Rate 12.10% 12.10% 12.00%
CAD Gross Domestic Product (MoM) 0.30% 0.20% 0.30%
CAD Gross Domestic Product (YoY) 1.70% 1.30% 1.10%
USD Employment Cost Index 0.30% 0.50% 0.40%
CAD Industrial Product Price (MoM) 0.10% 0.00% 1.30%
CAD Raw Materials Price Index (MoM) -1.70% 0.50% 2.20%
USD S&P/Case-Shiller Composite-20 (YoY) 9.30% 9.00% 8.10%
USD NAPM-Milwaukee 48.43 51.5 50.98
USD S&P/CS 20 City s.a. (MoM) 1.24% 0.90% 1.00%
USD S&P/Case-Shiller Home Price Index 146.57 146.43 146.14
USD Chicago Purchasing Manager 49 52.5 52.4
USD Consumer Confidence 68.1 61 61.9
AUD AiG Performance of Manufacturing Index 36.7   44.4

 

The Markets

Stocks pushed higher on Tuesday as investors reacted to positively to economic reports pertaining to consumer confidence and the housing market;  the consumer confidence index for April came in at 68.1, beating estimates of 61, while the Case-Shiller 20-City Index showed a year-over-year gain of 9.3%, better than the 8.7% that was expected.   However, economic news wasn’t all upbeat.   Chicago PMI showed a surprise contraction for April with a reading of 49.0, well below estimates calling for 52.4.   A reading of 50 marks the dividing line between expansion and contraction.   April and May are typically the strongest months of the year for manufacturing, but recent reports from districts across the US have reported some of the weakest readings since the economy emerged from the recession.   ISM will put it all together in a report to be released today at 10:00am, providing a final say as to the strength of this economically sensitive business sector.   Other key economic event include the FOMC Announcement and the ADP Employment Report, two reports that could dictate the market trend for many weeks to come.

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Now that the month of May is upon us, investors are questioning, “Can the stellar gains continue now that the ‘Sell in May’ period is upon us?”   Since 1950, the S&P 500 has averaged a gain for the month of May of 0.14%, inline with average gains for any given month in the year.   35 of the past 63 May’s have ended with a positive result.   During years when the S&P 500 has posted double digit gains in the first four months of the year, May has averaged a return of 0.50%, positive in 9 out of 15 instances.   No evidence exists as to a greater likelihood for a May pullback in a market that has posted strong year-to-date gains coming into this fifth month of the year.   In fact, when the trend is positive, it typically continues in that manner into May, and vice versa when the trend is negative.   The period for seasonal strength in equity markets concludes on May 5th, after which a trendless market is the average.   Economic events over the next few days, including central bank announcements and employment report releases, are likely to set the tone for the month ahead.   The technical backdrop of equity markets has shown deterioration over recent months, particularly pertaining to momentum, and the likelihood is increasing that a market correction is near based on recent warning signals that have become prominent in April.   Stay tuned!

Seasonal charts of companies reporting earnings today:

AGN CLX CMCSA COT CVH HUM IRM MA MRK SEE TWX VIAB ALL NLY SAM CBS CNW IPI LVS V

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.89.

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S&P 500 Index

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Chart Courtesy of StockCharts.com

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TSE Composite

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Chart Courtesy of StockCharts.com

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Horizons Seasonal Rotation ETF (TSX:HAC)

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Performance*

2013 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 5.82% 34.6%

* performance calculated on Closing NAV/Unit as provided by custodian 

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