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Stock Market Outlook for July 17, 2018

Retail Sales show the best performance through the first half of the year in over 25 years.

 

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:

Emerson Electric Co.  (NYSE:EMR) Seasonal Chart

Emerson Electric Co. (NYSE:EMR) Seasonal Chart

Fortune Brands Home & Security (NYSE:FBHS) Seasonal Chart

Fortune Brands Home & Security (NYSE:FBHS) Seasonal Chart

Donaldson Co, Inc. (NYSE:DCI) Seasonal Chart

Donaldson Co, Inc. (NYSE:DCI) Seasonal Chart

A. H. Belo Corp. (NYSE:AHC) Seasonal Chart

A. H. Belo Corp. (NYSE:AHC) Seasonal Chart

TELUS Corporation  (TSE:T) Seasonal Chart

TELUS Corporation (TSE:T) Seasonal Chart

Curtiss Wright Corp. (NYSE:CW) Seasonal Chart

Curtiss Wright Corp. (NYSE:CW) Seasonal Chart

EOG Resources, Inc.  (NYSE:EOG) Seasonal Chart

EOG Resources, Inc. (NYSE:EOG) Seasonal Chart

 

 

The Markets

Stocks gyrated around the flat-line on Monday as investors digested gains from recent sessions.  The S&P 500 Index shed a tenth of one percent, gyrating around resistance at 2800.  Defensive sectors were amongst the laggards on the day.  The consumer staples ETF (XLP) is showing signs of reacting to resistance at the 200-day moving average, a critical pivot point for the long-term trend of the fund.  Ever since the lows charted in 2009, the sector ETF has consistently held support around its rising 200-day moving average and this will be the first time since the last recession that the sector will be testing a declining 200-day moving average as resistance.  The relative performance of the sector ETF has rebounded back to declining trendline resistance and a break above this hurdle is warranted to argue a sustained defensive shift amongst investor positioning.  Seasonally, while the consumer staples sector tends to perform well relative to the broad market during the period of volatility for stocks, the sector tends to decline on an absolute basis through the end of September.

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Consumer Staples Sector Seasonal Chart

STAPLES Relative to the S&P 500
STAPLES Relative to the S&P 500

STAPLES Monthly Averages

On the economic front, a report on retail sales was released before Monday’s opening bell.  The headline print indicated that sales at retail locations increased by 0.5% in June, matching the consensus analyst estimate.  Excluding the more volatile components of autos and gas, the increase was a more muted 0.3%, short of the 0.5% forecasted increase.  Stripping out the seasonal adjustments, total retail trade in the US was actually lower by 3.6% in June, falling more than the 2.4% decline that is average for the month.  Year-to-date, retail trade is running 1.6% above the seasonal norm, representing the best first half of the year performance in over 25 years.  Strength in furniture, electronics, health, sporting goods, general merchandise, and gasoline stores emphasize the breadth of activity and the confidence of the consumer.  One category that was have highlighted in recent years as gauge of the strength of discretionary spending is showing an upbeat result of its own.  Restaurant sales had been struggling, underperforming average trends, for the past couple of years as consumers trimmed this discretionary item from their budgets.  For the first time since 2011, sales at food services and drinking places are showing an increase through the first half of the year that is above average, suggesting the improvement of the budgets of US consumers following the implementation of tax reform at the end of last year.  All indications suggest that the consumer is showing strength unlike anything we’ve seen in a long time.  The solid fundamental backdrop to the economy bodes well for risk assets, assuming investors can look past some of the headline risks that continue to distract.  Seasonally, retail sales tend to flat-line through the remainder of summer then surge higher in November and December as the year-end holidays fuel activity.  For a complete breakdown of the performance of the retail industry through the first half of the year, the charts can be accessed via the chart database at https://charts.equityclock.com/u-s-retail-trade-sales.

Retail Trade: Total Seasonal Chart

Monthly Retail Trade: Total Data

Retail Trade and Food Services, excluding Auto Seasonal Chart

The consumer is not the only source of strength in this economy.  Business activity is flourishing and manufacturers are busy producing product, even amidst the typical factory shutdown period.  July’s report from the New York Fed reiterates this fact.  The headline print of the Empire Manufacturing Survey showed that the General Business Conditions Index fell slightly in July to +22.6 from +25.0 previous.  Analysts were forecasting a print of +22.0.  Stripping out the seasonal adjustments, the level actually came in at +11.1, which is the second best level for July on record.  The average level for this time of year is –4.8.  Factory shutdowns in the month have historically lead to a contraction in activity in this first full month of the summer season, but this result suggests that factories are remaining open, working through this summer slowdown.  We’ll obtain further insight on the health of the manufacturing economy on Tuesday when June’s report on Industrial Production is released.  Manufacturing activity seasonally rises from the July lows through August and September as manufacturers produce goods for the end of year consumer spending period.

Empire State General Business Conditions Index Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended close to neutral at 0.99.

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Sectors and Industries entering their period of seasonal strength:

Dow Jones Utility Average Seasonality

$UTIL Relative to the S&P 500

Monthly Seasonal Dow Jones Utility Average

 

 

Seasonal charts of companies reporting earnings today:

ADTRAN, Inc. (ADTN) Seasonal Chart America Movil, S.A.B. de C.V. (AMX) Seasonal Chart Comerica Incorporated (CMA) Seasonal Chart CSX Corporation (CSX) Seasonal Chart Fidelity National Financial, Inc. (FNF) Seasonal Chart First Horizon National Corporation (FHN) Seasonal Chart Fulton Financial Corporation (FULT) Seasonal Chart Goldman Sachs Group, Inc. (The) (GS) Seasonal Chart Interactive Brokers Group, Inc. (IBKR) Seasonal Chart Johnson & Johnson (JNJ) Seasonal Chart Marten Transport, Ltd. (MRTN) Seasonal Chart Nationstar Mortgage Holdings Inc. (NSM) Seasonal Chart Neogen Corporation (NEOG) Seasonal Chart Omnicom Group Inc. (OMC) Seasonal Chart Pinnacle Financial Partners, Inc. (PNFP) Seasonal Chart Progressive Corporation (The) (PGR) Seasonal Chart Prologis, Inc. (PLD) Seasonal Chart The Charles Schwab Corporation (SCHW) Seasonal Chart United Continental Holdings, Inc. (UAL) Seasonal Chart United Financial Bancorp, Inc. (UBNK) Seasonal Chart UnitedHealth Group Incorporated (UNH) Seasonal Chart Wintrust Financial Corporation (WTFC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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