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Stock Market Outlook for June 15, 2017

The rise in the domestic production of oil starting to level off as price of commodity weakens.

 

Real Time Economic Calendar provided by Investing.com.

 

**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:

Brookfield Renewable Energy Partners LP (TSE:BEP.UN) Seasonal Chart

Brookfield Renewable Energy Partners LP (TSE:BEP.UN) Seasonal Chart

Metro, Inc. (TSE:MRU) Seasonal Chart

Metro, Inc. (TSE:MRU) Seasonal Chart

 

 

The Markets

Stocks traded rather mixed on Wednesday with the Dow Jones Industrial Average closing at another all-time high and the S&P 500 Index ending marginally lower, shedding gains following Fed Chair Janet Yellen’s press conference.  The session was notably risk-off with defensive sectors (staples, utilities, and health care) closing higher, bucking the losses realized amongst the other sector benchmarks.  Both the S&P 500 Consumer Staples and Utilities sector indices are bouncing from their respective 20-day moving averages, seemingly poised to make another run at the all-time highs.  Seasonally, the consumer staples sector remains in a period of seasonal strength through to November, while utilities enters a period of seasonal strength at the end of July.

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Consumer Staples Sector Seasonal Chart

STAPLES Relative to the S&P 500
STAPLES Relative to the S&P 500

STAPLES Monthly Averages

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Utilities Sector Seasonal Chart

UTILITIES Relative to the S&P 500
UTILITIES Relative to the S&P 500

UTILITIES Monthly Averages

On the economic front, one of the most important gauges of the state of the consumer in the US was released before Wednesday’s opening bell.  The headline print for the report on retail sales indicated a decline of 0.3% in May, missing estimates calling for a gain of 0.1%.  Less the more volatile gas and autos, sales were unchanged (0.0%), still a miss versus estimates calling for an increase of 0.3%.  Stripping out the seasonal adjustments, total retail trade actually increased by 6.6%, above the 5.5% 20-year average increase for the month of May.  Year-to-date, the trend is lagging its seasonal norm by three-tenths of a percent as auto sales continue to weigh; excluding autos, retail trade remains above its historical norm.  Non-store retailers showed a strong result in the month, higher by 7.3%, well above the 0.2% decline that is average for this spring period.  Perhaps to be expected given the struggle at brick-and-mortar stores, the year-to-date change in this category is the strongest in nine years.  Elsewhere, home improvement was easily apparent in the report as furniture and building materials/gardening equipment sales surged amidst the home renovation season.  Furniture sales were higher by 9.2%, while building materials and gardening equipment/supply sales were higher by 16.4%; the average change for each is 5.9% and 8.1%, respectively.  Both categories are trending above their historical averages year-to-date.  One segment of the report, however, is hinting of a consumer under struggle: restaurant sales.  While there is a certain discretionary element to each category, the sales in these areas tend to meet a certain need that can’t be satisfied otherwise.  This is certainly applicable to grocery, gasoline, furniture, health/personal care, and clothing sales.  But restaurant sales, as represented by the food services and drinking places category, is almost entirely discretionary, fulfilled by other means when other areas of the household budget encroach on entertainment spending.  The change in food services and drinking place sales in May was higher by 1.8%, less than half of the average increase for the month of 4.7%.  The year-to-date change in this category is higher by 2.1%, the weakest increase through the first five months of the year since 2007 when consumers started to rein in discretionary spending given ballooning debt levels ahead of the “Great Recession.”  The average increase in this category through the month of May is 6.7%.  Overall, while the aggregate result could be classified as being average, weakness in the most discretionary category suggests a consumer that may be strained, a threat to future reports pertaining to this segment of the economy.  Consumer spending represents the largest input to Gross Domestic Product (GDP), therefore the impact of retail sales cannot be overlooked.

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Turning to the weekly report on petroleum inventories from the Energy Information Administration (EIA), stockpiles of crude oil fell less than expected last week, down by 1.7 million barrels in the period ending June 9th.  Gasoline inventories, meanwhile, were higher by 2.1 million barrels.  The result subtracted two-tenths of a day from the days of supply of oil, now sitting at 29.5, and gasoline saw a rise of three-tenths of a day to 25.4.  Seasonally, the spring rise in gasoline stockpiles peaks, on average, in the last week of June.  As for oil, following one of the largest year-to-date increases in history, domestic oil production is showing signs of levelling off, halting the multi-month rising trend as the price of the commodity struggles.  Domestic production is higher by 6.4% year-to-date, far surpassing the –0.4% average change over the same timeframe.  Seasonally, production typically declines through June and July as an increase in imports suffice the heightened demand through the summer. The price of oil fell sharply following the report, breaking below support at $45.  The lower limit of the declining trend channel is now being tested.

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Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.84.

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Benchmarks entering their period of seasonal strength:

ALL ORDINARIES Seasonal Chart

^AORD Relative to the S&P 500
^AORD Relative to the S&P 500

^AORD Monthly Averages

HANG SENG Index Seasonal Chart

^HSI Relative to the S&P 500
^HSI Relative to the S&P 500

^HSI Monthly Averages

BSE SENSEX Index Seasonal Chart

^BSESN Relative to the S&P 500
^BSESN Relative to the S&P 500

^BSESN Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

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S&P 500 Index

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TSE Composite

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