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Stock Market Outlook for October 9, 2017

Employment data shocks the market.

 

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:

Mawson Resources Ltd. (TSE:MAW) Seasonal Chart

Mawson Resources Ltd. (TSE:MAW) Seasonal Chart

Intrinsyc Technologies Corp. (TSE:ITC) Seasonal Chart

Intrinsyc Technologies Corp. (TSE:ITC) Seasonal Chart

InterActiveCorp (NASD:IAC) Seasonal Chart

InterActiveCorp (NASD:IAC) Seasonal Chart

Icici Bank Ltd. (NYSE:IBN) Seasonal Chart

Icici Bank Ltd. (NYSE:IBN) Seasonal Chart

Progenics Pharmaceuticals (NASD:PGNX) Seasonal Chart

Progenics Pharmaceuticals (NASD:PGNX) Seasonal Chart

Royal Caribbean Cruises (NYSE:RCL) Seasonal Chart

Royal Caribbean Cruises (NYSE:RCL) Seasonal Chart

Alaska Air Group, Inc. (NYSE:ALK) Seasonal Chart

Alaska Air Group, Inc. (NYSE:ALK) Seasonal Chart

The Bank of New York Mellon Corporation (NYSE:BK) Seasonal Chart

The Bank of New York Mellon Corporation (NYSE:BK) Seasonal Chart

AK Steel Holding Corporation (NYSE:AKS) Seasonal Chart

AK Steel Holding Corporation (NYSE:AKS) Seasonal Chart

Crown Castle Intl Corp. (NYSE:CCI) Seasonal Chart

Crown Castle Intl Corp. (NYSE:CCI) Seasonal Chart

Bunge Ltd. (NYSE:BG) Seasonal Chart

Bunge Ltd. (NYSE:BG) Seasonal Chart

Centene Corp (NYSE:CNC) Seasonal Chart

Centene Corp (NYSE:CNC) Seasonal Chart

Prudential Financial Inc. (NYSE:PRU) Seasonal Chart

Prudential Financial Inc. (NYSE:PRU) Seasonal Chart

Stantec Inc.  (TSE:STN) Seasonal Chart

Stantec Inc. (TSE:STN) Seasonal Chart

 

 

The Markets

Stocks closed marginally lower on Friday as investors reacted to the shock of seeing the first decline in nonfarm payrolls since September of 2010.  The S&P 500 Index shed a mere tenth of a percent as investors looked past the negative employment result, instead focusing on earnings season, which largely gets underway next week.  For the week, the large-cap benchmark was higher by 1.19%, kicking off the fourth quarter on a positive note and pushing the benchmark into overbought territory on a weekly basis, according to the relative strength index (RSI).  Reaction to the earnings reports ahead will be key given that stocks are likely to need a catalyst to push beyond overbought levels in the near-term.  Seasonally, we are at the time of year when volatility typically hits a peak, on average, but so far investors have been given little reason to abandon their bullish bias given the prospect of tax reform and strength in economic and corporate data.  One of those elements has now been put on notice given the weak employment report; investors will be looking for proof that September’s result was just an anomaly.  Corporate earnings ahead similarly have much to prove given the level of valuations.

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http://charts.equityclock.com/seasonal_charts/indexes/VIX.PNG

On the economic front, employment reports were released in both Canada and the US.  With respect to the nonfarm payroll report in the US, the headline print presented a bit of a shock as payrolls are indicated to have fallen by 33,000, significantly below the consensus estimate that called for an increase of 100,000.  Analysts had set a wide range of estimates given the impact of the recent hurricanes, but the negative result even exceeds the lower limit of expectations.  Stripping out the seasonal adjustments, employment actually increased by 340,000, or 0.2%, which is around a third of the average increase for this time of year.  This is the weakest September performance since 2008 when the economy was in the midst of falling into a recession.  The result has put pressure of the year-to-date change, which is now around 0.3% below average for this time of year.  A decline in manufacturing and information payrolls during a month when they typically expand and weakness in retail employment are a few standouts in the report, although none of the moves are particularly extreme.  There is also no particular category that can be directly attributed to the storms that hit the southern states, although employment amongst insurance carriers did see a rare uptick during the month.  The BLS indicates that the impact of the recent hurricanes cannot be precisely quantified and looking through the non-adjusted data we would have to share this view.  However, the areas of weakness in the report, such as retail, do coincide with some of the broader fundamental trends that we have been observing with regards to sales, while strength in durable goods manufacturing remains prominent with the year-to-date change in durable manufacturing employment showing year-to-date performance that is well above average.  Therefore, while an impact from the storms appears certain, it is possible that the underlying weakness is just being masked by the short-term anomaly attributed to the hurricanes.  As mentioned in previous reports, we are into the time of year when consumer spending is a dominant theme, leading to significant gains in retail, but with this segment of the economy weakening, retail employment may act as a drag on the seasonally adjusted headline results through the last quarter of the year.  Further monitoring is required.  To access the charts of all of the categories in this report, please visit the seasonal chart database at http://charts.equityclock.com/u-s-employment-situation.

Total Nonfarm Seasonal Chart

Monthly Total Nonfarm Data

Manufacturing Seasonal ChartManufacturing: Durable goods Seasonal ChartRetail trade Seasonal ChartInformation Seasonal Chart

http://charts.equityclock.com/seasonal_charts/economic_data/CEU0500000008_seasonal_chart.PNG

North of the border, employment in Canada showed decent results, despite the headline miss.  Statscan reported that employment in this country expanded by 10,000 last month, which is a slight miss versus estimates calling for a 15,000 increase.  Stripping out the seasonal adjustments, employment actually fell by 150,400, or 0.8%.  This is much better than the average decline for this time of year of 1.2%.  The year-to-date change is higher by 2.2%, inline with the average increase through the first three quarters of the year.  Below the surface the trends in full-time and part-time employment are also improving.  Full-time employment showed a better than average change in September, supporting the year-to-date performance at a time when part-time employment is typically desired going into the end of year holidays.  Full-time employment is now higher on the year by 3.9%, a tenth of a percent above average through September.  Meanwhile, the increase in part-time employment was less than average, pressuring the year-to-date change into a below average position for the first time since the spring.  Obviously, strength in full-time employment is desired given the stability it presents to household income.  A smaller than average decline in public administration, along with a better than average increase in educational services helped to support the aggregate result.  Diverging from the US, retail employment is actually an area of strength on this side of the border, running 1.8% above average through the end of September.  This is consistent with the strength in retail sales that has been evident through the first half of the year, although the result for July indicated that the strength was waning.  Overall, September’s labour force survey was solid, certainly not showing the same detrimental impact that the US was victim to.  While the rise in the Canadian dollar through the summer had been taking a toll on everything from manufacturing to export activity, the Canadian economy may now be breaking free from this negative influence, especially with the domestic currency retracing some of the gains over recent weeks.  Seasonally, given its roots in manufacturing and commodity sensitive areas, employment in Canada tends to decline between August and January.

Canada Employment Seasonal Chart

Canada Employment full-time Seasonal Chart Canada Employment part-time Seasonal Chart Canada Unemployment Seasonal Chart

Just briefly on the wholesale trade report for August, wholesales sales in the US showed very strong results, lifting the year-to-date change into an above average position for the first time since 2014.  Strength in chemicals, groceries, motor vehicle & parts, paper & paper products, and metals & minerals helped to lift the overall result.  For a complete breakdown of the report, you can access the seasonal charts via the database at http://charts.equityclock.com/u-s-wholesale-trade-sales-and-inventories.

Wholesale Sales  Seasonal Chart

Monthly Wholesale Sales  Data

Wholesale Sales Seasonal Chart

Wholesale Inventories Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.85.

 

 

Sectors and Industries entering their period of seasonal strength:

Computer Hardware Industry Seasonal Chart
S5CMHW Index Relative to the S&P 500S5CMHW Index Relative to the Sector

S5CMHW Index Monthly Averages

Software & Services Industry Seasonal Chart
S5SFTW Index Relative to the S&P 500S5SFTW Index Relative to the Sector

S5SFTW Index Monthly Averages

Transportation Industry Seasonal Chart
S5TRAN Index Relative to the S&P 500S5TRAN Index Relative to the Sector

S5TRAN Index Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

  • No significant earnings scheduled

 

S&P 500 Index

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TSE Composite

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