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Stock Market Outlook for December 10, 2013

Todays_Markets4

Upcoming US Events for Today:

  1. NFIB Small Business Optimism Index for November will be released at 7:30am.   The market expects 92.4 versus 91.6 previous.
  2. Job Openings and Labor Turnover Survey for October will be released at 10:00am.   The market expects 3.905M versus 3.913M previous.
  3. Wholesale Trade for October will be released at 10:00am.   The market expects a month-over-month increase of 0.4%, consistent with the previous report.

 

Upcoming International Events for Today:

  1. China Industrial Production for November will be released.   The market expects a year-over-year increase of 10.0% versus an increase of 10.3% previous.
  2. China Retail Sales will be released.   The market expects a year-over-year increase of 13.3%, consistent with the previous report.
  3. Great Britain Industrial Production for October will be released at 4:30am EST.   The market expects a year-over-year increase of 3.2% versus an increase of 2.2% previous.
  4. Great Britain Merchandise Trade for October will be released at 4:30am EST.   The market expects a deficit of £9.4B versus a deficit of £9.8B previous.
  5. Japan PPI for November will be released at 6:50pm EST.   The market expects a year-over-year increase of 2.7% versus an increase of 2.3% previous.
  6. Japan Machine Orders for October will be released at 6:50pm EST.   The market expects a year-over-year increase of 15.0% versus an increase of 13.0% previous.

 

Recap of Yesterday’s Economic Events:

Event Actual Forecast Previous
CNY Imports (YoY) 5.30% 7.00% 7.60%
CNY Trade Balance $33.80B $21.20B $31.10B
CNY Exports (YoY) 12.70% 7.00% 5.60%
JPY Nominal Gross Domestic Product (QoQ) 0.30% 0.40% 0.40%
JPY Trade Balance – BOP Basis (Yen) -Â¥1091.9B -Â¥1005.5B -Â¥874.8B
JPY Gross Domestic Product (QoQ) 0.30% 0.40% 0.50%
JPY Gross Domestic Product Annualized 1.10% 1.60% 1.90%
CNY Consumer Price Index (YoY) 3.00% 3.10% 3.20%
CNY Producer Price Index (YoY) -1.40% -1.50% -1.50%
JPY Bankruptcies (YoY) -10.58%   -7.34%
JPY Eco Watchers Survey: Outlook 54.8   54.5
JPY Eco Watchers Survey: Current 53.5   51.8
EUR German Trade Balance (euros) 17.9B 18.3B 20.3B
EUR Euro-Zone Sentix Investor Confidence 8 10 9.3
EUR German Industrial Production s.a. (MoM) -1.20% 0.70% -0.70%
EUR German Industrial Production n.s.a. and w.d.a. (YoY) 1.00% 3.10% 0.60%
CAD Housing Starts 192.2K 195.0K 198.2K
JPY Tertiary Industry Index (MoM) -0.70% 0.10% 0.00%
JPY BSI Large All Industry (QoQ) 8.3   12
JPY BSI Large Manufacturing (QoQ) 9.7   15.2

 

The Markets

Stocks closed higher on Monday as strength from Friday’s session carried through to the start of the week.   With the slight gain on the session, the S&P 500 inched into positive territory on the month, while the Dow Jones industrial Average remained around four-tenths of a percent below a similar result.   The first half of the month tends to be variable for equity markets as investors reallocate portfolios prior to the end of the year.   Tax loss selling also plays a role.   As a result, the S&P 500 has shown an equal tendency for gains and losses during the first 15 calendar days of December.   Beyond this relatively flat period, on average, the Santa Claus Rally period has a strong history of fuelling gains in equity markets through to the first couple of trading days of the new year.    There are only 14 full trading sessions left in the year, and even with the strong gains recorded year-to-date, there are no indications, as of yet, that the trend is about to change anytime soon.  

Along with a positive equity market trend, stocks are also supported by positive risk sentiment.  Riskier, often economically sensitive assets, continue to outperform defensive, low-beta counterparts.   A simple look at the sector performance over the last few weeks shows that Technology and Finanicals have outperformed the S&P 500 Index, while Utiities and Consumer Staples have underperformed the broad market move.   Other indications of positive risk sentiment include the outperformance of the Dow Jones Transportation Average versus the Dow Jones Industrial Average, the outperformance of Copper versus Gold, and the outperformance of junk bonds versus investment grade corporate bonds.   Even semiconductor, small cap, and emerging market stocks are once again showing strength compared to the large cap S&P 500 index.   As long as investors remain bullish in risk assets, equity market gains over the intermediate-term is the most probable outcome.

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Seasonal charts of companies reporting earnings today:

SWHC

PLAB

PPHM

MIND

IRET

INTL

HRB

CENT

AVNR

TOL

JW-A

AZO

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.94.

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S&P 500 Index

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TSE Composite

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Horizons Seasonal Rotation ETF (TSX:HAC)

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2013 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 9.69% 39.5%

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