Contact | RSS Feed

Stock Market Outlook for September 12, 2018

Bond market appears to be pricing in the risk of wage inflation, a scenario suggested by recent Job Openings and Labor Turnover Survey.

 

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:

Lamar Advertising Company  (NASDAQ:LAMR) Seasonal Chart

Lamar Advertising Company (NASDAQ:LAMR) Seasonal Chart

LyondellBasell Industries NV (NYSE:LYB) Seasonal Chart

LyondellBasell Industries NV (NYSE:LYB) Seasonal Chart

Walker & Dunlop Inc. (NYSE:WD) Seasonal Chart

Walker & Dunlop Inc. (NYSE:WD) Seasonal Chart

Virtus Investment Partners (NASD:VRTS) Seasonal Chart

Virtus Investment Partners (NASD:VRTS) Seasonal Chart

Mercury Systems Inc. (NASD:MRCY) Seasonal Chart

Mercury Systems Inc. (NASD:MRCY) Seasonal Chart

Global Indemnity plc. (NASD:GBLI) Seasonal Chart

Global Indemnity plc. (NASD:GBLI) Seasonal Chart

Acco Brands Corp. (NYSE:ACCO) Seasonal Chart

Acco Brands Corp. (NYSE:ACCO) Seasonal Chart

 

 

The Markets

Stocks closed higher on Tuesday in typical turnaround Tuesday fashion.  The S&P 500 Index opened lower but found buyers around the rising 20-day moving average, achieving an outside reversal candlestick on the day.  Investors continue to battle with issues surrounding trade as the US seeks to come to an agreement with Canada, Europe, and China.

image

Despite the subdued market return on the day, the activity provided all the hallmarks of a risk-on session.  Discretionary, technology, and energy led the gains on the day, while staples, utilities, and health care closed lower.  Treasury bonds were also firmly negative as investors continue to react to the threat of wage pressures and heightened odds of a rate hike at the upcoming FOMC meeting that is set to take place closer to the end of the month. The long-term treasury bond ETF (TLT) is inching closer to support at $117.80, a break of which would complete a double-top pattern that became apparent at the end of August around $122.  Major moving averages are all pointing lower, as are momentum indicators, as the classic risk-off bet unwinds.  Seasonally, strength in treasury prices tends to fade beyond the end of August.

image

30 Year U.S. Treasury Bonds Futures (US) Seasonality
CME_US1 Relative to the S&P 500CME_US1 Relative to the Sector

Monthly Seasonal 30 Year U.S. Treasury Bonds Futures (US)

On the economic front, the monthly job openings and labour turnover survey is suggesting that opportunities remain plentiful as companies look to expand in this strong economy.  The headline print indicated that openings increased by 1.7% in July to 6.939 million, the highest level in the history of the report.  Analysts were expecting a slight decline to 6.67 million.  Stripping out the seasonal adjustments, openings actually increased by 7.8%, which is less than the 10.5% average increase for the summer month.  The year-to-date change now sits 12.1% above the seasonal average trend, the best performance since 2014.  Strength in non-durable manufacturing, transportation, information, and business service openings are driving the aggregate result.  But while openings are trending firmly above average, hires are trending slightly below the seasonal norm.  Through the month of July, hires are 2.2% below average, highlighting the skills gap that is preventing open opportunities from being filled.  As for the the gauge of optimism in worker prospects in this tight labor market, the quit rate is lagging compared to seasonal norms, albeit nothing to become overly concerned of as of yet.  The level of quits is 5.5% below average through the month of July.  Seasonally, quits tend to peak in the month  of August as summer hires fall out of the market.  Overall, the trends suggest that businesses are anxious to attract qualified employees, a sign of a healthy economy, but their ability to expand is being limited.  This capacity issue could materialize in higher wages as companies will be forced to pay more to retain and attract the talent that they need.  Seasonally, openings tends to fall off into the back half of the year as construction and manufacturing activity wanes through the fourth quarter.

Job Openings: Total Nonfarm Seasonal Chart

Monthly Job Openings: Total Nonfarm Data

Job Openings: Total Nonfarm Seasonal Chart

Quits: Total Nonfarm Seasonal Chart Hires: Total Nonfarm Seasonal Chart Layoffs and Discharges: Total Nonfarm Seasonal Chart

Elsewhere in the economy, a report on wholesale inventories and sales was released after the opening bell.  The headline print indicated that sales were unchanged in July, while inventories climbed by 0.6%.  Stripping out the seasonal adjustments, sales were actually lower by 3.7%, while inventories were higher by 0.5%; the average change for each is –3.2% and +0.7%, respectively.  The year-to-date change for sales and inventories are within two-tenths of a percent from the seasonal average trend, suggesting that wholesalers are just about on target with inventory control measures.  Focussing on the sales side, weak trends with respect to autos and construction materials are acting as a drag and offsetting strength that computers, metals, machinery, and farm product raw materials are adding to the tally.  As for that last category, the change in farm product raw materials this year is running 17.6% above average through the end of July, representing the best performance in a decade.  The trend is encouraging for the seasonal trade in agriculture stocks through the end of the year.  Seasonally, wholesale sales tend to level off through the remainder of the year, while inventories rise through September and October, ahead of the important consumer spending period.  For a breakdown of the performance of wholesale sales, from a seasonal perspective, the charts can be accessed via the following link: https://charts.equityclock.com/u-s-wholesale-trade-sales-and-inventories

Wholesale Sales  Seasonal Chart

Monthly Wholesale Sales  Data

Wholesale Sales Seasonal Chart

Wholesale Inventories Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.88.

image

 

 

 

 

Seasonal charts of companies reporting earnings today:

Aceto Corporation (ACET) Seasonal Chart  Oxford Industries, Inc. (OXM) Seasonal Chart  PolarityTE, Inc. (COOL) Seasonal Chart Tailored Brands, Inc. (TLRD) Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.