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Stock Market Outlook for September 28, 2018

Strength in durable goods orders remains quite broad, but rising inventories still suggests a supply/demand mismatch.

 

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:

AAR Corp. (NYSE:AIR) Seasonal Chart

AAR Corp. (NYSE:AIR) Seasonal Chart

Acuity Brands, Inc. (NYSE:AYI) Seasonal Chart

Acuity Brands, Inc. (NYSE:AYI) Seasonal Chart

Magic Software Enterprises Ltd. (NASDAQ:MGIC) Seasonal Chart

Magic Software Enterprises Ltd. (NASDAQ:MGIC) Seasonal Chart

Snap-on Incorporated  (NYSE:SNA) Seasonal Chart

Snap-on Incorporated (NYSE:SNA) Seasonal Chart

Marathon Petroleum Corp. (NYSE:MPC) Seasonal Chart

Marathon Petroleum Corp. (NYSE:MPC) Seasonal Chart

Alaska Air Group, Inc. (NYSE:ALK) Seasonal Chart

Alaska Air Group, Inc. (NYSE:ALK) Seasonal Chart

Forward Air Corp. (NASD:FWRD) Seasonal Chart

Forward Air Corp. (NASD:FWRD) Seasonal Chart

 

 

 

The Markets

Stocks closed higher on Thursday as investors executed final trades before the close of the quarter.  The S&P 500 Index closed higher by just over a quarter of one percent, which was well off of the highs of the day when the benchmark showed a gain closer to three-quarters of one percent.  The relentless rise in the US Dollar is suspected to have been a factor, weighing on commodities and commodity sensitive stocks into the close.  The S&P 500 Materials Sector Index ended lower by close to one percent, trading back to around the lower limit of a consolidation range that has constrained the benchmark through much of the year.  The sector concludes its period of seasonal weakness at the end of September.

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Materials Sector Seasonal Chart

MATERIALS Relative to the S&P 500
MATERIALS Relative to the S&P 500

MATERIALS Monthly Averages

On the economic front, a report on durable goods orders showed a better than expected result for the month of August.  The headline print indicated that orders of durable goods increased by 4.5% last month, surpassing estimates that called for a 2.2% rise in the period.  Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for Durable Goods Industries actually increased by 16.9%, which is better than the average increase of 11.1% for the summer month.  The gauge of durable goods activity is running 10.4% above average year-to-date, which is the best performance since 2010 when the economy emerged from the last recession.  Headlines highlight the strength in airline orders for the month, but looking at the trends amongst the categories, the strength is quite broad.   Orders of non-defense capital goods excluding aircraft are running 10.2% above average, which is the second best performance in the past two decades, lagging only slightly behind last year’s stellar result.  Computers, primary metals, automobiles, communication equipment, and appliances are all showing trends that are firmly above normal.  The only category to show a below average trend in 2018 is non-defense aircraft and parts.  Also encouraging in the report was a negative divergence in the level of inventories, which fell by 0.3% in August.  The average change for the month is +0.3%.  Inventories have been rising above average through the past couple of years, raising concerns of a supply/demand mismatch that could take a toll on future activity.  Overall, durable manufacturing continues show incredible strength, despite some manufacturer sentiment indicators that have shown varied results in recent months.  For a compete breakdown of the report, the charts are available in the database at https://charts.equityclock.com/u-s-durable-goods-orders.

Value of Manufacturers' New Orders for Durable Goods Industries Seasonal Chart

Monthly Value of Manufacturers' New Orders for Durable Goods Industries Data

Value of Manufacturers' Total Inventories for Durable Goods Industries Seasonal Chart

Turing to the report on US International Trade, despite the Trump administration’s best efforts to sway the needle on the balance of trade with the rest of the world, the deficit continues to rise.  The headline print indicated that the trade deficit in the US increased by 5.1% in August to $75.8 Billion.  The consensus estimate was for a decline of 1.8% to $70.8 Billion.  A 1.6% decline in exports combined with a 0.7% increase in imports attributed to the aggregate result.  Stripping out the seasonal adjustments, exports actually increased by 4.3% and imports increased by 2.5%; the average change for each is +5.9% and +1.6%, respectively.  The year-to-date change shows that exports are now below the seasonal average trend by 1.9% and imports are above the seasonal average by 0.5%.  Strength in the US Dollar appears to be a factor, overcoming the influence that the Trump administration is trying to exert by the tariffs that have been enacted over the past few months.  On the export side, industrial supplies showed a rare negative divergence in the month of August, falling by 2.9% versus the average increase of 4.2%.  There has only been three other instances in the past 22 years when industrial supplies exports have declined in the month of August.  Other categories, including automotive and capital goods, are trending below average year-to-date with the exception of consumer goods, which is essentially inline with the average trend.  While the dollar would have acted as a weight on export activity, the shift of manufacturing activity into the US and away from other countries is no doubt also a factor as the US benefits from its more favourable tax environment.  Seasonally, both exports and imports tend to rise into the month of October as the economy sees one last push to produce and ship goods ahead of the important year-end spending season.

US International Trade - Imports Seasonal Chart

Monthly US International Trade - Imports Data

US International Trade – Imports Seasonal Chart

US International Trade - Exports Seasonal Chart

Monthly US International Trade - Exports Data

US International Trade – Exports Seasonal Chart

US Foods, Feeds, Beverages Exports Seasonal Chart US Industrial Supplies Exports Seasonal Chart US Capital Goods Exports Seasonal Chart US Automotive Vehicles, etc. Exports Seasonal Chart US Consumer Goods Exports Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended close to neutral at 0.94.

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Sectors and Industries entering their period of seasonal strength:

FTSE 100 Index Seasonal Chart

^FTSE Relative to the S&P 500
^FTSE Relative to the S&P 500

^FTSE Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Aceto Corporation (ACET) Seasonal Chart BlackBerry Limited (BB) Seasonal Chart Vail Resorts, Inc. (MTN) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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