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Stock Market Outlook for July 9, 2018

Employment in Canada shows the weakest increase through the first half of the year since 2009.

 

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:

Heritage Financial Corp. (NASD:HFWA) Seasonal Chart

Heritage Financial Corp. (NASD:HFWA) Seasonal Chart

Nemaska Lithium (TSE:NMX) Seasonal Chart

Nemaska Lithium (TSE:NMX) Seasonal Chart

Newmont Mining Corporation  (Public, NYSE:NEM) Seasonal Chart

Newmont Mining Corporation (Public, NYSE:NEM) Seasonal Chart

Kinross Gold Corporation  (TSE:K) Seasonal Chart

Kinross Gold Corporation (TSE:K) Seasonal Chart

eBay Inc.  (NASDAQ:EBAY) Seasonal Chart

eBay Inc. (NASDAQ:EBAY) Seasonal Chart

SAP SE (NYSE:SAP) Seasonal Chart

SAP SE (NYSE:SAP) Seasonal Chart

Motorola Solutions Inc. (NYSE:MSI) Seasonal Chart

Motorola Solutions Inc. (NYSE:MSI) Seasonal Chart

Heritage Financial Corp. (NASD:HFWA) Seasonal Chart

Heritage Financial Corp. (NASD:HFWA) Seasonal Chart

AVX Corp. (NYSE:AVX) Seasonal Chart

AVX Corp. (NYSE:AVX) Seasonal Chart

Telefonica S.A. (ADR) (NYSE:TEF) Seasonal Chart

Telefonica S.A. (ADR) (NYSE:TEF) Seasonal Chart

Alimentation Couche-Tard Inc (TSE:ATD.B) Seasonal Chart

Alimentation Couche-Tard Inc (TSE:ATD.B) Seasonal Chart

Belo Sun Mining (TSE:BSX) Seasonal Chart

Belo Sun Mining (TSE:BSX) Seasonal Chart

International Business Machines Corp. (NYSE:IBM) Seasonal Chart

International Business Machines Corp. (NYSE:IBM) Seasonal Chart

 

 

The Markets

Stocks closed sharply higher on Friday as investors shrugged off trade war concerns and once again focussed on the solid fundamentals closer to home.  Before the opening bell, the Bureau of Labor Statistics reported that 213,000 payrolls were added last month, beating the consensus analyst estimate that called for a rise of 190,000.  The unemployment rate ticked higher to 4.0% and average hourly earnings rose by 0.2% in the month and 2.7% year-over-year.  Stripping out the seasonal adjustments, the increase was somewhat of a disappointment, rising 646,000, or 0.4%.  The average increase for the month of June is 0.6%.  The below average result instantly stripped away the above average trend in employment achieved through the first five months of the year.  The 1.0% increase through the first half of the year is about inline with the seasonal average change.  Manufacturing is once again a standout in the results, particularly those categories pertaining to computers and electronics.  Computer and electronics manufacturing employment is up 1.8% through the first half of the year, the best performance since 1997.  On average, employment in this category has declined by 0.9% through the same period.  Aside from the uptick in manufacturing employment, highlights amongst the other categories are few.  Construction, wholesale trade, retail trade, and utilities employment all showed increases in the month that were below average.

Total Nonfarm Seasonal Chart

Monthly Total Nonfarm Data

On the wage front, average hourly earnings were actually lower by 0.3% in the month, a divergence from the 0.1% gain for the sixth month of the year.  Earnings are now higher on the year by 0.9%, which is seven-tenths of one percent below the seasonal average trend.  Following results that were firmly above average through the month of April, this gauge of inflation has fallen back as the labor force participation rate expands.  Pervious indications pointed to a tightening labor force, which would have fueled wage inflation to an extent not seen  in over a decade.  Seasonally, September is one of the strongest months of the year for wage growth as lower paid summer hires give way to full-time employment. Overall, while not as strong of a report as what the headlines may have suggested, the report did give investors another middle-ground result that was neither too hot nor too cold.  For a complete breakdown of the results, the charts can be accessed via the chart database at https://charts.equityclock.com/u-s-employment-situation.

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

North of the border, another better than expected seasonally adjusted increase masked a weaker than average print.  The headlines indicated that 31,000 jobs were added in June, beating the consensus analyst estimate that forecasted a rise of 18,000.  Stripping out the seasonal adjustments, employment actually increased by 193,700, or 1.0%.  The average increase for the month of June is 1.3%.  The year-to-date change is 1.2% below the seasonal average trend, representing the weakest increase in employment through the first half of the year since 2009.  The year-to-date change in those that are unemployed is running 6.1% above average, once again the strongest since 2009.  Weakness in manufacturing employment is one of the categories weighing on the aggregate result as activity is pulled south of the border.  Construction, wholesale and retail trade, finance, health care, and public administration round off the categories that are showing below average trends in 2018.  Employment in the US is clearly benefitting at the expense of its neighbours to the north, threatening to weigh on economic activity through the years ahead.  Seasonally, employment in Canada tends to flat-line through the remainder of summer then dips in the month of September as summer hires fall out of the workforce.  For a complete breakdown of the results, the charts can be accessed via the following link: https://charts.equityclock.com/canada-labour-force-survey.

Canada Employment Seasonal Chart

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

With investors cheering the better than expected employment reports, stocks on both sides of the border climbed.  The S&P 500 Index added almost nine-tenths of one percent, moving above short-term resistance at 2743.  Another point of short-term resistance at 2764 was tested around the highs of the session.  The breakout from the approximately 43-point short-term trading range has upside implications back towards the June high around 2790.  Unfortunately, with volume very light in this holiday shortened week, it is difficult to suggest conviction behind the move higher.

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For the week, the large-cap benchmark saw a gain of 1.52% to start the month of July.  Support around the 20-week moving average remains intact and momentum indicators are attempting to hold bullish territory.  On the downside, the 50-week moving average at 2642 is an important hurdle supporting the longer-term trend, while horizontal resistance around 2800 is keeping the upside capped.  Until these bounds are broken, an intermediate trading range is suggested.

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Stocks in the health care sector topped the leaderboard on Friday as biotech stocks surged following promising trial results from Biogen’s Alzheimer drug.  The iShares Nasdaq Biotech ETF (IBB) gapped higher to the tune of 3.78%, charting the best one day return in over a year.  The industry ETF has been outperforming the broader market since May, just as positive seasonal tendencies were clicking into gear.  The chart of the ETF shows gap support between $112 and $113.50, providing a range for investors to shoot off of should the advance consolidate over the near-term.  Seasonally, stocks in the industry tend to move higher through to the start of October.

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Healthcare Sector Seasonal Chart

HEALTHCARE Relative to the S&P 500
HEALTHCARE Relative to the S&P 500

HEALTHCARE Monthly Averages

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

S5BIOTX Index Monthly Averages

Sentiment on Friday, as gauged by the put-call ratio, closed neutral at 1.00.

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Seasonal charts of companies reporting earnings today:

Helen of Troy Limited (HELE)  Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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