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Stock Market Outlook for October 1, 2018

S&P 500 Index has gained an average of 1.0% in October, positive in 60% of periods.

 

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:

Broadwind Energy, Inc. (NASD:BWEN) Seasonal Chart

Broadwind Energy, Inc. (NASD:BWEN) Seasonal Chart

LATAM Airlines Group SA (NYSE:LTM) Seasonal Chart

LATAM Airlines Group SA (NYSE:LTM) Seasonal Chart

Banco Latinoamericano de Comercio (NYSE:BLX) Seasonal Chart

Banco Latinoamericano de Comercio (NYSE:BLX) Seasonal Chart

John B. Sanfilippo & Son, Inc. (NASD:JBSS) Seasonal Chart

John B. Sanfilippo & Son, Inc. (NASD:JBSS) Seasonal Chart

F5 Networks, Inc. (NASD:FFIV) Seasonal Chart

F5 Networks, Inc. (NASD:FFIV) Seasonal Chart

Cameco Corporation  (TSE:CCO) Seasonal Chart

Cameco Corporation (TSE:CCO) Seasonal Chart

The Gap Inc.  (NYSE:GPS) Seasonal Chart

The Gap Inc. (NYSE:GPS) Seasonal Chart

Akamai Technologies, Inc. (NASDAQ:AKAM) Seasonal Chart

Akamai Technologies, Inc. (NASDAQ:AKAM) Seasonal Chart

EchoStar Holding Corp. (NASD:SATS) Seasonal Chart

EchoStar Holding Corp. (NASD:SATS) Seasonal Chart

YPF Sociedad Anonima (NYSE:YPF) Seasonal Chart

YPF Sociedad Anonima (NYSE:YPF) Seasonal Chart

Nucor Corporation  (NYSE:NUE) Seasonal Chart

Nucor Corporation (NYSE:NUE) Seasonal Chart

NLIndustries, Inc. (NYSE:NL) Seasonal Chart

NLIndustries, Inc. (NYSE:NL) Seasonal Chart

 

 

The Markets

Stocks closed mixed on Friday as investors held the tape steady ahead of the close of the month and the close of the third quarter.  The S&P 500 Index ended essentially unchanged on the last trading day in September, capping what has been another positive month for the large-cap benchmark.  The Index was higher by 0.43% for the month, a positive divergence compared to the 0.6% decline that is average for this last month of the third quarter.  Momentum indicators on the monthly look at the benchmark remain in overbought territory, but signs of rolling over are not yet apparent.  Stocks remain on an upward trajectory, defying seasonal norms that call for flat results through the summer months.  Health care was the top sector performer in October while financials and REITs were the worst.  In the Seasonal Advantage Portfolio that we manage with CastleMoore, health care has been our largest sector weight throughout the summer and holdings in the financial sector are not only higher, but are also outperforming the market.  To learn more about this managed strategy, email us at seasonalportfolio@equityclock.com.

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Turing to the tendencies for stocks in the month of October, while the month has a notorious reputation for volatility, the average performance is actually firmly positive. The S&P 500 Index has gained an average of 1.0% in this first month of the fourth quarter, representing the fifth best monthly performance of the year. Gains have been realized in 60% of Octobers over the past 50 years with returns ranging from a loss of 21.8% in October of 1987 to a gain of 16.3% in October of 1974. The month has tended to show gains running into the start of the third quarter earnings season, following which profit taking leads to the average low for the market on October 27th.

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From a sector standpoint, technology has historically provided the best performance in this first full month of Fall, gaining 4.1%, on average, as investors chase performance in growth stocks ahead of the end of the year.  Utilities, meanwhile, has been the worst performer in the month of October, gaining an average of 0.6% and underperforming the broad market return.  Areas to focus on have been sent out to Equity Clock subscribers in our monthly outlook.  To receive a copy, subscribe to either a monthly or yearly membership at https://charts.equityclock.com/subscribe.

Technology Sector Seasonal Chart

TECHNOLOGY Relative to the S&P 500
TECHNOLOGY Relative to the S&P 500

TECHNOLOGY Monthly Averages

Utilities Sector Seasonal Chart

UTILITIES Relative to the S&P 500
UTILITIES Relative to the S&P 500

UTILITIES Monthly Averages

On the economic front, Statscan released GDP statistics for the month of July.  The headline print indicated that monthly GDP increased by 0.2% in this summer month, edging past estimates that called for a rise of 0.1%.  Stripping out the seasonal adjustments, GDP was actually lower by 4.8% in the month, which is better than the average decline for the first month of the third quarter of 6.2%.  The year-to-date change now sits seven-tenths of one percent above average through the end of July, which is the second best performance in the past 15 years, lagging only behind last year’s upbeat result.  Goods producing industries continue to drive the aggregate result, while service producing industries show performance that is inline with the seasonal norm.  Technology, energy, construction, manufacturing, retail, and transportation are among the major categories showing above average performance in 2018, while the rate sensitive areas of the economy (finance, real estate, and utilities) are lagging average trends.  As we observed in the US, the factory slowdown that is typical for the month of July was less severe than average as businesses kept production at high levels in order to accommodate the demands of a strong economy, particularly south of the border.  Petroleum refiners continued to rebound from the spring decline attributed to the outage at the Syncrude facility.,   Chemical manufacturing was little changed, mitigating sharply negative tendencies in the month.  Semiconductor manufacturing is higher by 34.2% through the first seven month of the year, significantly higher than the 1.7% gain that is average over this timeframe.  This is the best performance for semiconductor manufacturing since 2002 when the industry rebounded from the tech bust and recession from the year prior.  Transportation barely fluctuated in the month, also mitigating negative tendencies in the month as air and rail transportation maintained a high level of activity.  Truck, water, and pipeline transportation are also running well above average this year.  Overall, the strength of the manufacturing economy continues to make itself known in the results, while rising interest rates take a toll on those areas directly exposed to fluctuations in the cost of borrowing.  It seems like only a matter of time before rising interest rates have a broader impact as central banks attempt to normalize policy.  Seasonally, GDP in Canada climbs to the highs of the year in September as goods are produced ahead of the critical spending season at the end of the year.  For a breakdown of the results, the charts are available in the database at https://charts.equityclock.com/canada-monthly-gross-domestic-product-gdp-by-industry.

Canada GDP - All industries Seasonal Chart

Monthly Canada GDP - All industries Data

Statscan also released data on industrial product prices for the month of August.  The headline and non-seasonally adjusted print indicated that prices fell by 0.5% last month, slightly more than the consensus estimate that called for a 0.3% decline.  The average change for the month is +0.2%.  The index is running 1.6% above average year-to-date, driven by clothing, plastic, lumber, pulp, primary ferrous metals, machinery, and packaging material prices.  Energy and petroleum products is one of the few categories to show a below average pace through the month of August.  Seasonally, industrial product prices tend to decline through the fourth quarter as energy commodity prices fade following the high demand summer period.  The seasonal charts for the report are available in the database at https://charts.equityclock.com/canada-industrial-product-price-index-ippi-by-north-american-product-classification-system-napcs

Canada Total, Industrial product price index (IPPI) Seasonal Chart

Monthly Canada Total, Industrial product price index (IPPI) Data

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.04.

 

 

 

 

Sectors and Industries entering their period of seasonal strength:

DAX Index Seasonal Chart

$DAX Relative to the S&P 500
$DAX Relative to the S&P 500

$DAX Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Cal-Maine Foods, Inc. (CALM) Seasonal Chart 

 

 

S&P 500 Index

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TSE Composite

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Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

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