Stock Market Outlook for March 26, 2019
Suddenly, the yield on 10-year treasury bonds relative to 3-month bills matters?
*** 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:
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General Cable Corp. (NYSE:BGC) Seasonal Chart
Monster Beverage Corp. (NASD:MNST) Seasonal Chart
C&F Financial Corp. (NASD:CFFI) Seasonal Chart
World Acceptance Corp. (NASD:WRLD) Seasonal Chart
Summit Hotel Properties Inc. (NYSE:INN) Seasonal Chart
U.S. Auto Parts Network Inc. (NASD:PRTS) Seasonal Chart
Linamar Corp. (TSE:LNR.TO) Seasonal Chart
Cott Corp. (TSE:BCB.TO) Seasonal Chart
Owens & Minor Inc. Holding Co. (NYSE:OMI) Seasonal Chart
The Markets
Stocks closed flat on Monday as investors weighed concerns pertaining to global recession risks with optimism following the release of the Mueller report that failed to provide a smoking gun that would indict the president. The S&P 500 Index closed down by less than a tenth of a percent, gently sliding below the widely scrutinized 2800 level that is seen as an important point of resistance. Shares of financials continued to weigh as yields declined, a reaction to the Fed’s path laid out following its meeting last week. Seasonally, financials tend to strengthen into the month of April, however, the actions of the Fed have set an alternate course.
The decline in yields over recent days has led to an inversion at various points along the yield curve. Of course, it has been widely telegraphed that an inversion of the yield curve in a leading indicator recessionary indicator as investors move out along the curve in anticipation of lower shorter-term rates in the future. Suddenly, the difference between the yields of 10-year treasury notes versus 3-month bills matter. Previously, it was the 10’s over 2’s that were more broadly accepted as the tell, but now that the the very short end of the curve, which has been manipulated by the Fed, has risen above the intermediate, the focus has shifted. Previous recessions were led by an inversion at multiple points along the curve, whether looking at 10-year over 3-months, 10’s over 2’s, or 30’s over 10’s. As of present, they are all signalling different things. The 10 year over 3 months has gone negative, the 10 year over 2 year has flattened out above 0 since the start of December, and the 30 year over 10 year has risen since the middle of 2018. The latter two have yet to invert. Clearly, the market, or more particularly the media, is making much ado about nothing.
Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.86.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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