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Stock Market Outlook for July 18, 2018

Reports on manufacturing show exceptional strength as business activity flourishes in this new tax environment.

 

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:

Lee Enterprises, Inc. (NYSE:LEE) Seasonal Chart

Lee Enterprises, Inc. (NYSE:LEE) Seasonal Chart

Kimberly-Clark Corporation  (NYSE:KMB) Seasonal Chart

Kimberly-Clark Corporation (NYSE:KMB) Seasonal Chart

Morningstar Inc. (NASD:MORN) Seasonal Chart

Morningstar Inc. (NASD:MORN) Seasonal Chart

Broadridge Financial Solutions (NYSE:BR) Seasonal Chart

Broadridge Financial Solutions (NYSE:BR) Seasonal Chart

The Scotts Miracle-Gro Company  (NYSE:SMG) Seasonal Chart

The Scotts Miracle-Gro Company (NYSE:SMG) Seasonal Chart

IPG Photonics Corp. (NASD:IPGP) Seasonal Chart

IPG Photonics Corp. (NASD:IPGP) Seasonal Chart

Fortis Incorporated  (TSE:FTS) Seasonal Chart

Fortis Incorporated (TSE:FTS) Seasonal Chart

 

 

The Markets

Stocks grinded higher on Tuesday despite the threat of a selloff following a disappointing earnings report from Netflix.  The S&P 500 Index added four-tenths of one percent, led by materials, technology, and consumer staples.  The performance on the day gives a cross-section of the sentiment of investors at present, from those that are defensive to those that are risk-seeking, as the market places their bets on the direction of stocks through the remainder of the earnings season.  Reports pick up in the days ahead, either giving investors incentive to continue the intermediate trend of higher-highs and higher-lows, or acting as the catalyst to book profits, as is typical following the second quarter earnings season.

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On the economic front, a report on industrial production reiterated the strength that exists in the US.  The headline print indicated that industrial production increased by 0.6% in June, inline with the consensus analyst estimate.  The manufacturing component also showed an inline result, up 0.8% for the month.  Stripping out the seasonal adjustments, total industrial production actually increased by 3.3% in June, edging past the average increase for the month of 2.9%.  The result put the first half change at +3.8%, firmly above the average increase by this point in the year of 3.2%.  Strength in manufacturing, business equipment, and materials are behind the aggregate result as business activity flourishes in this new tax environment.  Consumer goods and Utilities are the only major categories to show below average trends in 2018, primarily the result of below average strength in the non-durable goods sub-category and weakness in the natural gas production sub-category.  Continuing to standout in the report is the defense and space equipment category, the year-to-date trend of which is hovering 4.4% above average. This is the best performance since the first half of 2010 and one of the best gains in decades as robust spending on defense and a resurgence in initiatives pertaining to space fuel strength in the category.  Overall, the report is indicative of a strong US economy, which is seeing business activity thrive, despite the headline risks that are keeping equity investors rather cautious.  The economic fundamentals, barring any headline shock, continue to bode well for risk assets.  For a complete breakdown of all of the components of the report, the charts can be accessed via the database at https://charts.equityclock.com/u-s-industrial-production.

Industrial Production: Total Seasonal Chart

Monthly Industrial Production: Total Data

Industrial Production: Consumer goods Seasonal ChartIndustrial Production: Business equipment Seasonal ChartIndustrial Production: Defense and space equipment Seasonal ChartIndustrial Production: Construction supplies Seasonal ChartIndustrial Production: Materials Seasonal ChartIndustrial Production: Manufacturing Seasonal ChartIndustrial Production: Utilities Seasonal Chart

In Canada, Statscan released a manufacturing report of its own.  May’s report on Manufacturing Sales indicated that activity rebounded by 1.4% in the month, a significant improvement from the 1.3% decline reported in the month prior.  Stripping out the seasonal adjustments, sales of goods manufactured actually gained 10.7% in May, which is almost double the 5.4% increase that is average for the fifth month of the year.  Year-to-date, manufacturing sales are running 4.2% above average, which is the best performance through the first five months of the year since 2008.  This is a surprising shift following the below average trend shown in the months prior to this result.  New orders are up by 24.7% through the first five months of the year, which is the best result since 2002.  Previous suggestions that manufacturing activity is struggling as a result of activity being pulled into the US are all of a sudden violated as activity storms back to life in this historically strong month for manufacturing activity.  Both non-durable and durable goods are showing strong results in the month.  Amongst the non-durables, which had been struggling prior to this report, food manufacturing, breweries, and chemical manufacturing all all showing gains that are well above average for the month and the first five months overall.  Weakness in the Canadian dollar may be acting as a tailwind as production becomes cheaper when translated back into US dollars.  This tailwind could continue into the summer and remain evident when results for June are reported in the month ahead.  Seasonally, June marks an important peak for manufacturing activity, just prior to the July slowdown attributed to factory closures.

Sales of goods manufactured (shipments) Seasonal Chart

Monthly Sales of goods manufactured (shipments) Data

Sales of goods manufactured (shipments) Seasonal Chart

New orders, estimated values of orders received during month Seasonal Chart Unfilled orders, estimated values of orders at end of month Seasonal Chart Raw materials, fuel, supplies, components, estimated values at end of month Seasonal Chart Goods or work in process, estimated values at end of month Seasonal Chart Finished goods manufactured, estimated values at end of  month Seasonal Chart Total inventory, estimated values of total inventory at end of the month Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, once again ended around neutral, closing the day at 0.95.

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Seasonal charts of companies reporting earnings today:

Abbott Laboratories (ABT) Seasonal Chart Alcoa Corporation (AA) Seasonal Chart American Express Company (AXP) Seasonal Chart ASML Holding N.V. (ASML) Seasonal Chart Badger Meter, Inc. (BMI) Seasonal Chart BancorpSouth Bank (BXS) Seasonal Chart Canadian Pacific Railway Limited (CP) Seasonal Chart Cathay General Bancorp (CATY) Seasonal Chart Cohen & Steers Inc (CNS) Seasonal Chart Crown Castle International Corporation (CCI) Seasonal Chart Crown Holdings, Inc. (CCK) Seasonal Chart Datawatch Corporation (DWCH) Seasonal Chart eBay Inc. (EBAY) Seasonal Chart Ericsson (ERIC) Seasonal Chart International Business Machines Corporation (IBM) Seasonal Chart Kinder Morgan, Inc. (KMI) Seasonal Chart M&T Bank Corporation (MTB) Seasonal Chart Morgan Stanley (MS) Seasonal Chart Northern Trust Corporation (NTRS) Seasonal Chart Novartis AG (NVS) Seasonal Chart Preferred Bank (PFBC) Seasonal Chart Resources Connection, Inc. (RECN) Seasonal Chart Textron Inc. (TXT) Seasonal Chart U.S. Bancorp (USB) Seasonal Chart Umpqua Holdings Corporation (UMPQ) Seasonal Chart Union Bankshares Corporation (UBSH) Seasonal Chart United Rentals, Inc. (URI) Seasonal Chart Universal Forest Products, Inc. (UFPI) Seasonal Chart W.W. Grainger, Inc. (GWW) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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