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Stock Market Outlook for December 15, 2017

Huge comeback for retail sales puts 2017 on track for one of the best years on record.

 

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:

TORC OIL AND GAS LTD (TSE:TOG) Seasonal Chart

TORC OIL AND GAS LTD (TSE:TOG) Seasonal Chart

Terra Nitrogen Company, L.P. (NYSE:TNH) Seasonal Chart

Terra Nitrogen Company, L.P. (NYSE:TNH) Seasonal Chart

Loblaw Companies Limited  (TSE:L) Seasonal Chart

Loblaw Companies Limited (TSE:L) Seasonal Chart

Solitario Exploration & Royalty (TSE:SLR) Seasonal Chart

Solitario Exploration & Royalty (TSE:SLR) Seasonal Chart

Acadian Timber Corp. (TSE:ADN) Seasonal Chart

Acadian Timber Corp. (TSE:ADN) Seasonal Chart

Timken Co. (NYSE:TKR) Seasonal Chart

Timken Co. (NYSE:TKR) Seasonal Chart

Dorel Industries, Inc.  (TSE:DII.B) Seasonal Chart

Dorel Industries, Inc. (TSE:DII.B) Seasonal Chart

Skechers USA Inc (NYSE:SKX) Seasonal Chart

Skechers USA Inc (NYSE:SKX) Seasonal Chart

Annaly Capital Management, Inc. (NYSE:NLY) Seasonal Chart

Annaly Capital Management, Inc. (NYSE:NLY) Seasonal Chart

BHP Billiton Limited (ADR) (NYSE:BHP) Seasonal Chart

BHP Billiton Limited (ADR) (NYSE:BHP) Seasonal Chart

Petroleo Brasileiro SA (ADR) (NYSE:PBR) Seasonal Chart

Petroleo Brasileiro SA (ADR) (NYSE:PBR) Seasonal Chart

 

 

The Markets

Stocks dipped on Thursday as investors reacted to some uncertainties pertaining to the progress to pass the tax reform legislation.  Typical end of year portfolio reallocations and the settlement of open options and futures positions ahead of Friday’s quadruple witching event were, arguably, also factors in the session’s decline.  The S&P 500 Index shed around four-tenths of one percent, giving back the vast majority of the week’s gain.  Consumer discretionary was the lone sector to close higher on the day following deal news between Fox and Disney.  The discretionary sector has been on a tear for the past month and a half, doubling the return of the S&P 500 Index since the start of November as retail and broadcast stocks emerge from the rut that they have been stuck in for much of the year.  The sector index has become significantly overbought in the past few weeks, limiting near-term upside potential.  Short and intermediate-term support is apparent at the the 20 and 50-day moving averages at 762 and 742, respectively.  Seasonally, the sector remains in a period of strength through to mid-April.

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Consumer Discretionary Sector Seasonal Chart

DISCRETIONARY Relative to the S&P 500
DISCRETIONARY Relative to the S&P 500

DISCRETIONARY Monthly Averages

On the economic front, a report on retail sales showed surprising strength at the start of the traditional holiday spending period.  The headline print showed that retail sales increased by 0.8% in November, surpassing the 0.3% forecasted increased.  Less autos, the increase for the month was even better at 1.0%.  Stripping out the the seasonal adjustments, the 5.8% actual increase in retail trade in the second to last month of the year is the best November read on record, far surpassing the 1.7% average increase for this time of year.  Year-to-date, the change in retail sales is now 3.4% above average on the year, instantly elevating the 2017 calendar year performance from one of the worst in the past decade to one of the best on record.  Powering the aggregate result was non-store sales, which jumped by 21.3%, also the best November performance in the history of the report.  Black Friday and Cyber Monday deals look to be a major factor, drawing online sales from October into this holiday month.  As for some of the physical retailers, electronic, clothing, and department stores saw significant strength, higher by 37.1%, 20.2%, and 34.7%, respectively.  Even the decline in auto and building material sales in the report were far less than average, something that was hinted at in previous reports.  Overall, this is an incredibly strong result and representative of the consumer confidence numbers that have been reported for a number of months.  The statistics indicate that consumers started their holiday shopping early and aggressively took advantage of the deals surrounding the US Thanksgiving.  Whether or not this pulls from December’s results, as non-store sales did from October, has yet to be seen.  Earlier results suggested a reluctance of consumers to open their wallets for some of the most discretionary categories of the report, such as autos and restaurants, potentially threatening the sales of goods for the holiday season.  While the change in sales in the auto and restaurant categories are still on track to show one of the weakest calendar year performance on record, November’s report eases concerns that other categories will be impacted once the final tallies for 2017 are reported in the month ahead.  December is, quite obviously, historically the strongest month for retail sales, increasing by an average of 17.4% with not a single year showing a decline.

Retail Trade: Total Seasonal Chart

Monthly Retail Trade: Total Data

Retail Trade: Total Seasonal Chart

Retail Trade: Nonstore Retailers Seasonal Chart Retail Trade: Auto and Other Motor Vehicles Seasonal Chart Retail Trade and Food Services, excluding Auto Seasonal Chart Retail Trade: Furniture and Home Furnishings Stores Seasonal Chart Retail Trade: Building Materials, Garden Equipment and Supplies Dealers Seasonal Chart Retail and Food Services Sales Seasonal Chart Retail Trade: Food and Beverage Stores Seasonal Chart Retail Trade: Electronics and Appliance Stores Seasonal Chart Retail Trade: Health and Personal Care Stores Seasonal Chart Retail Trade: Sporting Goods, Hobby, Book, and Music Stores Seasonal Chart Retail Trade: Miscellaneous Store Retailers Seasonal Chart Retail Trade: General Merchandise Stores Seasonal Chart Retail Trade: Motor Vehicle and Parts Dealers Seasonal Chart Retail Trade: Clothing and Clothing Accessory Stores Seasonal Chart Retail Trade: Gasoline Stations Seasonal Chart Retail Trade: Department Stores (Excluding Leased Departments) Seasonal Chart Retail Trade: Grocery Stores Seasonal Chart Retail Trade: Food Services and Drinking Places Seasonal Chart

With all of the tallies regarding manufacturing, wholesale, and retail sales for the month of October now reported, the US Census Bureau released their compiled data for business sales and inventories for the month.  The headline print indicated that business sales increased by 0.6% in October, while inventories declined by 0.1%, inline with analysts estimates.  Stripping out the seasonal adjustments, sales were actually higher by 2.5%, while inventories rose by 1.7%.  The average change for each in the month of October is +1.5% and +2.5%, respectively.  The year-to-date change places sales directly inline with its seasonal average, while inventories lag.  Wholesalers and retailers are showing effective inventory controls, reacting to the sluggish activity in brick-and-mortar stores prior to this result.  Manufacturers still have confidence that they will be able to move their growing inventory levels in the future with the year-to-date change running almost a full percent above the seasonal norm.  Manufacturers sales, meanwhile, are just marginally above average, raising concerns that the robust manufacturing activity has been more of a benefit to inventories than to sales.  The seasonally adjusted inventories to sales ratio for manufacturers has essentially flat lined over the past year, while the ratios for retailers and wholesalers show declines.  Of course, the risk is that all of the manufactured supply isn’t met with demand, forcing manufacturers to cut prices, thereby impacting margins.  Seasonally, sales and inventories of both manufacturers and retailers tend to move in opposite directions in December (sales up, inventories down) as goods are sold from inventory during the year-end spending period.

Total Business Sales Seasonal Chart

Monthly Total Business Sales Data

Total Business Sales Seasonal Chart

Manufacturers Sales Seasonal Chart Retailers Sales Seasonal Chart Merchant Wholesalers Sales Seasonal Chart

Total Business Inventories Seasonal Chart

Total Business Inventories Seasonal Chart

Manufacturers Inventories Seasonal Chart Retailers Inventories Seasonal Chart Merchant Wholesalers Inventories Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.80.

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Sectors and Industries entering their period of seasonal strength:

Biotech Industry Seasonal Chart
S5BIOTX Index Relative to the S&P 500S5BIOTX Index Relative to the Sector

S5BIOTX Index Monthly Averages

Silver Futures (SI) Seasonal Chart
FUTURE_SI1 Relative to the S&P 500FUTURE_SI1 Relative to Gold

FUTURE_SI1 Monthly Averages

Copper Futures (HG) Seasonal Chart
FUTURE_HG1 Relative to the S&P 500FUTURE_HG1 Relative to Gold

FUTURE_HG1 Monthly Averages

 

Seasonal charts of companies reporting earnings today:

Ohr Pharmaceuticals, Inc. (OHRP) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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