Stock Market Outlook for April 16, 2020
Retail sales in the US were down 18.5% (NSA) through the first three months of the year, the largest first quarter decline since 1993.
*** 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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Humana, Inc. (NYSE:HUM) Seasonal Chart
Westport Innovations, Inc. (TSE:WPRT.TO) Seasonal Chart
Franco-Nevada Corp. (NYSE:FNV) Seasonal Chart
Universal Health Services – Class B (NYSE:UHS) Seasonal Chart
Crocs, Inc. (NASD:CROX) Seasonal Chart
CyrusOne Inc. (NASD:CONE) Seasonal Chart
iShares Canadian Growth Index ETF (TSE:XCG.TO) Seasonal Chart
Vanguard Intermediate-Term Bond ETF (NYSE:BIV) Seasonal Chart
SPDR S&P 1500 Momentum Tilt ETF (AMEX:MMTM) Seasonal Chart
The Markets
Stocks dropped on Wednesday as investors digested weaker than expected reports on the economy. First up was retail sales in the US. The headline print of March’s report on Retail Trade indicated that activity fell by 8.7% last month, which is weaker than the 7.3% decline that was expected by analysts. Less gas and autos, the decline was more muted at down 3.1%, which is stronger than the 4.5% decline that was expected. Stripping out the adjustments, retail sales actually increased by 3.2% versus the month prior. This is significantly weaker than the 13.7% increase that is average for March. Last month’s read was the weakest March change in the 28 years of data that we have on record. The year-to-date change is now down 18.5%, which is 5.9% below the seasonal average trend through the first quarter. To find a weaker first quarter change, you would have to look back to the first three months of 1993, when retail sales fell by 20.0%. We sent further insight to subscribers intraday. Signup now and we’ll provide more insight on where consumers are spending (and not spending) and how we use this data to determine our exposure to risk assets.
The S&P 500 Index traded lower by 2.20% following the report’s release, turning lower from around its declining 50-day moving average. Stochastics are showing signs of rolling over from overbought territory, while the MACD histogram declined versus the session prior as the signal line starts to converge with the MACD line. Buying exhaustion is beginning to be implied. MACD has gone from a low of –237 on March 23rd to –5.2 today, bouncing back from a significantly oversold state to neutral territory. This may be the logical time for stocks to pause as investors digest earnings season and determine how to position following this quarterly event.
Also released on the economic front on Wednesday was a report on Industrial Production in the US. The headline print of March’s report indicates that activity fell by 5.4% last month, which was weaker than the consensus analyst estimate that called for a decline of 4.2%. The manufacturing component reported a decline of 6.3%, another miss versus the consensus analyst estimate that called for a drawdown of 4.0%. Stripping out the seasonal adjustments, industrial production in the US actually fell by 5.2% in March, which is significantly weaker than the 0.7% increase that is average for the month. The year-to-date change is now down by 5.0%, which is the weakest first quarter change since the 8.0% decline recorded through the first three months of 1940. The average change through this time of year is an increase of 1.0%. As usual, we sent out further insight to subscribers intraday. Signup now and we’ll send you our report.
Sentiment on Wednesday, as gauged by the put-call ratio, ended neutral at 0.99.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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