Stock Market Outlook for March 17, 2017
Job openings show weakest January increase on record.
**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates. Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities. As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
Stocks Entering Period of Seasonal Strength Today:
Stocks were mixed on Thursday as investors digested gains from the previous session, as well a reacted to the release of President Donald Trump’s budget blueprint. The S&P 500 shed less than two-tenths of a percent, led by declines in health care and utilities. Friday is bound to see a pickup in trading volumes as investors look to settle open options and futures positions in an event that has become known as quadruple witching.
On the economic front, manufacturing conditions in the US remain robust with the Philadelphia Fed Business Outlook Survey coming in at 32.8, pulling back slightly from last month’s multi-decade high of 43.3. The consensus analyst forecast was for a print of 30.0. Stripping out the seasonal adjustments, the manufacturing gauge hit 50 in its latest read, once again one of the highest levels since the early 1980s. The average read for the month of March is 25.3. The last month of the first quarter tends to be the peak for the year in this index; conditions soften, while remaining expansionary, through April, May, and June.
Elsewhere, housing starts continue to advance at a fairly stable clip. The headline print indicated that starts rose to a seasonally adjusted annual rate of 1.288 million, up from 1.251 million previous. Permits, however, were lower by 80,000 to a rate of 1.213 million. Stripping out the seasonal adjustments, starts were higher by 5.2%, better than the average increase for February of 4.6%. The northeast and south continue to hold an above average gain through the first two months of the year, while the midwest and west are lagging their average trends. The weakness in the report comes not from what has been started, but rather what hasn’t been started, or the future pipeline of projects. Housing units authorized, but not started, showed a rare decline in February, falling by 5.2%. The result surpasses the February 2009 decline of 4.4%, the largest February contraction on record. The average change in this category for the second month of the year is +1.4%. With the pipeline of projects seemingly depleting, the trend in starts and completions is under threat. All categories of the housing start report typically spike in the month of March as projects get underway amidst the beginning of spring, warranting a closer look at the numbers in the months ahead as activity picks up.
And finally, the monthly look at job openings and labor turnover showed an increase in the headline job openings level, however, the non-seasonally adjusted change was not as upbeat. Total nonfarm job openings are indicated to have increased by 1.6% to 5.626 million, however, stripping out the seasonal adjustments, the increase in openings was less than half of the average change, higher by 9.1%, the weakest January increase on record. The change in hires and layoffs were more inline with the average change for the first month of the year, while quits, a gauge of confidence amongst workers to transition to other opportunities, remained a little light compared to the historical norm. Quits were higher by 23.2% versus the average change of 25.4%. While one month does not make a trend, the significant lag on the openings front warrants monitoring as dwindling opportunities could take its toll on future employment reports. Openings and hiring typically ramp up through the spring as employers fulfill their seasonal requirements for the summer.
Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.91. The Average True Range (ATR) of the ratio appears to be on the rise again, typically an indication of investor instability as they gyrate between bullish and bearish option positions, trying to anticipate the next market move.
Seasonal charts of companies reporting earnings today:
S&P 500 Index