Stock Market Outlook for August 29, 2019
While the yield of the 30-year treasury bond continues to reach unprecedented levels, price of the investment has reached a pivotal level around the mid-point of its long-term rising trend channel.
*** 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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Axis Capital Holdings Ltd. (NYSE:AXS) Seasonal Chart
CVB Financial Corp. (NASD:CVBF) Seasonal Chart
China Southern Airlines Co. Ltd. (NYSE:ZNH) Seasonal Chart
The Markets
Stocks drifted higher on Wednesday in typical month-end fashion as investment managers reallocated portfolios before August comes to a close. The S&P 500 Index added close to two-thirds of one percent, trading back to its declining 20-day moving average, a level that the benchmark has struggled around through the course of the month. The energy, consumer discretionary, and industrial sectors each posted performance in excess of 1% during the session as investors flocked to those areas that they are underweight; the much loved utilities sector was the lone decliner on the session. This end of summer lift has typically supported stocks into the middle of September as the low volume trading environment around the Labor Day holiday creates a vacuum for stocks to move mildly higher.
The activity in the bond market continues to capture attention. The yield on the 30-year treasury note fell to a record low below 2% and is now undercutting the yield of the S&P 500 Index at 1.94% for the first time ever. These are unprecedented times with the cost of borrowing an any point along the curve seemingly on a path towards zero as investors buy the asset not for the income, but rather the capital appreciation. This creates a lack of commitment to the fixed income asset class as it is used more of a trading vehicle given the lacklustre income it generates for buy-and-hold investors. The price of the 30-year treasury note has reached an important pivotal level in its long-term trend of higher-highs and higher-lows. Price is testing the mid-point of its rising trading range, a level that has historically fuelled reaction in the bond and equity markets. While there is no telling what the longer-term implications of extraordinarily low rates will be, in the shorter-term it is overwhelmingly positive as the cost of borrowing is cheaper for businesses and consumers and equity valuations are improved.
On schedule for the Wednesday session, the Energy Information Administration (EIA) released the status of petroleum inventories in the US. The EIA reports that oil stockpiles fell by 10.0 million barrels last week, while both gasoline and distillate inventories fell by 2.1 million barrels. The days of supply of oil fell by seven-tenths to 24.4, while gasoline saw its days of supply contract by half of a day to 23.7. The average for each at this time of year is 21.7 and 23.0, respectively. Subscribe now to read our analysis of what the prospects are for the price of oil into the end of summer.
Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.18.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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