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Stock Market Outlook for June 14, 2018

Third largest increase in PPI for the month of May justifies the hawkish stance of the Fed.

 

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:

Westlake Chemical Corp. (NYSE:WLK) Seasonal Chart

Westlake Chemical Corp. (NYSE:WLK) Seasonal Chart

Southern First Bancshares, Inc. (NASD:SFST) Seasonal Chart

Southern First Bancshares, Inc. (NASD:SFST) Seasonal Chart

 

 

The Markets

Stocks closed lower on Wednesday following news that the Federal reserve hiked its overnight lending rate by a quarter of one percent to a range of 1.75% to 2.00%.  But what had investors reacting more was an increase in the median fed funds forecast to 2.4% by the end of this year, suggesting two more hikes are slated before 2019.  The S&P 500 Index shed four-tenths of one percent, falling below the lows of the previous two sessions.  Daily momentum indicators are showing signs of rolling over as investors book profits from the positive trend over the past two months.

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A look at the May report on producer prices released before Wednesday’s opening bell provides good reason why the FOMC chose to hike the cost of borrowing.  The producer price Index (PPI) jumped by 0.5% last month, firmly above the 0.3% increase forecasted by analysts.  Stripping out the seasonal adjustments, the Producer Price Index for All Commodities was actually higher by 1.6% in May, which is the third largest increase for the month in over eight decades.  The average change for the fifth month of the year is +0.5%.  The result puts the year-to-date increase at +3.5%, the largest since 2011 amidst the economic recovery following the recession.  The average change through the first five months of the year is +2.4%. Whether looking at prices from the consumer or producer perspective, inflation is running strong, justifying the hawkish stance that the US Federal Reserve is portraying.  Seasonally, producer prices typically peak in July, trading lower through the back half of the year as commodity prices wane following the strong manufacturing uptick through the first half.

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

 Producer Price Index by Commodity for Final Demand: Finished Goods Seasonal Chart  Producer Price Index by Commodity for Final Demand: Finished Goods Less Foods and Energy Seasonal Chart

And briefly on the latest read of petroleum inventories in the US, the EIA is indicating that oil stockpiles fell by 4.1 million barrels last week, while gasoline inventories fell by 2.3 million barrels.  A huge snap-back in gasoline product supplied, a gauge of demand, coinciding with a rebound in the production of gasoline helped to pull down the days of supply of both oil and gas.  The days of supply of oil at 25.2 is the smallest since the start of February.  But despite the apparent return to normal in production of gasoline,the domestic production of oil is far from normal, jumping by another 100,000 barrels per day in the latest week to anther all-time high at 10.9 million bpd.  Seasonally, crude oil inventories tend to decline between now and the end of September, but with domestic production rising at an above average pace, it will be a battle between supply and demand of the energy commodity to determine where prices end up.

Weekly U.S. Days of Supply of Crude Oil excluding SPR  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Crude Oil excluding SPR (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks excluding SPR of Crude Oil Seasonal ChartWeekly U.S. Field Production of Crude Oil Seasonal ChartWeekly U.S. Commercial Crude Oil Imports Excluding SPR Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks of Total Gasoline Seasonal Chart Weekly U.S. Refiner and Blender Adjusted Net Production of Finished Motor Gasoline Seasonal Chart Weekly U.S. Product Supplied of Finished Motor Gasoline Seasonal Chart

The price of West Texas Intermediate (WTI) was higher by four-tenths of one percent following the result, continuing to hold below its 50-day moving average.  Rising trendline support now hovers around $65.

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Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.74.

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Seasonal charts of companies reporting earnings today:

Adobe Systems Incorporated (ADBE) Seasonal Chart Cherokee Inc. (CHKE) Seasonal Chart Finisar Corporation (FNSR) Seasonal Chart Fred's, Inc. (FRED) Seasonal Chart Jabil Inc. (JBL) Seasonal Chart The Michaels Companies, Inc. (MIK) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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