Contact | RSS Feed

Stock Market Outlook for December 5, 2017

Best chance for value stocks to finally outperform is in December.

 

Real Time Economic Calendar provided by Investing.com.

 

*** 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:

Martinrea International (TSE:MRE) Seasonal Chart

Martinrea International (TSE:MRE) Seasonal Chart

ENSCO International PLC  (NYSE:ESV) Seasonal Chart

ENSCO International PLC (NYSE:ESV) Seasonal Chart

 

 

The Markets

A massive reversal for stocks on Monday as investors were unable to keep major benchmarks afloat following the passing of the Senate tax bill.  The S&P 500 Index closed lower by around a tenth of one percent, giving up a gain of close to nine-tenths of one percent charted around the opening bell.  Gains in financials, industrials, materials, and consumer discretionary helped to stem the tide of selling pressures that materialized throughout the session.  Technology was a significant drag as semiconductor stocks continued to trade lower on profit-taking pressures.  Seasonally, this sector rotation that we are seeing is typical through to the middle of the month, at which point investors will often pick through the sold-off positions for a bounce into the new year. 

image

Technology Sector Seasonal Chart

TECHNOLOGY Relative to the S&P 500
TECHNOLOGY Relative to the S&P 500

TECHNOLOGY Monthly Averages

With the rotation away from some of the hot sectors of the year and into some of the laggards, growth stocks have noticeably suffered to the benefit of value stocks.  The ratio of the Russell 3000 Value index versus the Russell 3000 Growth index has rebounded from the lows of the year over the past week, now testing declining trendline resistance.  While the value benchmark remains in a long-term decline relative to its growth counterpart, there may be reason for optimism ahead.  Over the past 16 years, December has been the best month of the year for the value proposition as investors trim exposure to growth stocks that have theoretically grown in value through the course of the year.  This results in an average outperformance in the value index over growth in this last month of the year of 0.9%.  Thereafter, the trade returns to favour between mid-January and early April, on average.

image

image

image

On the economic front, the final read on the state of the manufacturing sector for October was released just after Monday’s opening bell.  The headline print indicated that factory orders fell by 0.1% in October, which is better than the consensus analyst estimate that forecasted a 0.4% decline.  Stripping out the seasonal adjustments, factory orders actually fell by 0.7%, which is firmly better than the average decline for the month of 1.7%.  Year-to-date, the value of manufacturers’ new orders is on track to show the best performance since 2010, higher by 6.0% through October.  The average change through this point in the year is +3.8%.  Shipments of these goods, meanwhile are running only 1.1% above average year-to-date.  Durable goods continue to account for the above average strength on the year, while non-durable goods orders, which are heavily influenced by commodity prices, lag their seasonal average trends.  Inventories are also rising at an above average rate, raising concerns pertaining to a supply and demand imbalance, which could result in pricing pressures if uncorrected.  Parsing through some of the standout details pertaining to the non-durable side of the report, the lag in beverage shipments continues to be notable, showing the weakest year-to-date performance in over 20 years.  Beverage shipments are down 4.3% through October, well below the 8.1% increase that is average for this time of year.  Inventories in this category are similarly weak, higher by only 3.9%, almost six percent below the seasonal norm.  The increasing trend towards healthier alternatives is easily to blame.  However, on the flipside of this “health kick,” consumers may not necessarily be becoming healthier.  The growth in pharmaceutical and medicine orders this year is trending firmly above average at 8.5%, over two percent above the seasonal norm.  This segment has largely come back from the sluggish activity charted in 2016 when the pricing debate dominated in the  run-up to the election. The ramp up in shipments of drugs into the start of cold and flu season often sees this category peak for the year in October.  Overall, the manufacturing economy remains on solid footing with a number of categories, particularly on the durable side, suggesting an economy that is growing even without the assistance of tax reform.  Strength on the non-durable side would be expected to follow, particularly if the growth in the economy fuels demand for commodities, thereby driving prices higher.  Commodity prices have historically been a beneficiary in tax reform years.

Value of Manufacturers' New Orders for All Manufacturing Industries Seasonal Chart

Monthly Value of Manufacturers' New Orders for All Manufacturing Industries Data

Value of Manufacturers’ New Orders for All Manufacturing Industries Seasonal Chart

Value of Manufacturers' Total Inventories for All Manufacturing Industries  Seasonal Chart Value of Manufacturers' Shipments for All Manufacturing Industries  Seasonal Chart Value of Manufacturers' New Orders for Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Total Inventories for Nondurable Goods Industries Seasonal Chart Value of Manufacturers' New Orders for Consumer Goods: Consumer Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Chemical Products: Pharmaceuticals and Medicines  Seasonal Chart Value of Manufacturers' Inventories, by Stage of Fabrication: Finished Goods for Nondurable Goods Industries: Petroleum and Coal Products  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Paper Products: Pulp, Paper, and Paperboard Mills  Seasonal Chart Value of Manufacturers' Total Inventories for Nondurable Goods Industries: Beverage and Tobacco Products: Beverages  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Chemical Products: Pesticides, Fertilizers, and Other Agricultural Chemicals  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Petroleum and Coal Products  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Beverage and Tobacco Products: Tobacco  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Petroleum and Coal Products: Petroleum Refineries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Beverage and Tobacco Products: Beverages  Seasonal Chart

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

image

 

 

 

 

 

 

Seasonal charts of companies reporting earnings today:

21Vianet Group, Inc. (VNET) Seasonal Chart AeroVironment, Inc. (AVAV) Seasonal Chart AutoZone, Inc. (AZO) Seasonal Chart Bank Of Montreal (BMO) Seasonal Chart  Dave & Buster's Entertainment, Inc. (PLAY) Seasonal Chart Dynagas LNG Partners LP (DLNG) Seasonal Chart EMCORE Corporation (EMKR) Seasonal Chart Francesca's Holdings Corporation (FRAN) Seasonal Chart G-III Apparel Group, LTD. (GIII) Seasonal Chart HD Supply Holdings, Inc. (HDS) Seasonal Chart HealthEquity, Inc. (HQY) Seasonal Chart Lands' End, Inc. (LE) Seasonal Chart Layne Christensen Company (LAYN) Seasonal Chart Liquidity Services, Inc. (LQDT) Seasonal Chart Oxford Industries, Inc. (OXM) Seasonal Chart RH (RH) Seasonal Chart Toll Brothers Inc. (TOL) Seasonal Chart Veeva Systems Inc. (VEEV) Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...

Comments are closed.