House prices record the strongest start to the year since 2006.
**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates. 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:
Stocks jumped on Tuesday as investors took advantage of the recent dip in prices to accumulate positions in beaten down sectors before the end of the first quarter. The S&P 500 Index continued its bounce from its 50-day moving average, rebounding back towards previous short-term support around the 20-day average. Cyclical sectors, mainly financials, energy, materials, and industrials, were the beneficiary of the market rally, while defensive sectors, such as consumer staples, health care, and utilities, closed flat on the day. Cyclical leadership is generally the hallmark of equity market strength, but after a month of lagging results, more evidence is required in order to confirm a cyclical shift, away from defensive sectors that had been supporting market indices. Funds that are short or underweight these cyclical segments would be required to have their trades filled by Tuesday’s close in order to have them settled by quarter-end. The positive bias typically continues into the first couple of days of the new quarter as fund inflows prop up market indices.
On the economic front, a report on international trade for February showed that the deficit contracted in February, something that President Trump has been seeking in his “put America first” policies. The deficit showed a balance of $64.8 billion, down from the previously revised $68.8 billion reported for January. The consensus forecast was for a level of $66.5 billion. A 2.1% decline in imports accompanied by a 0.1% decline in exports influenced the net result. Stripping out the seasonal adjustments, imports actually declined by 8.9%, much more than the average contraction of 3.6% for the second month of the year; exports, meanwhile, rose by seven-tenths of one percent, less than the average increase of 2.2%. The year-to-date change for exports remains below its seasonal trend and the trend for imports is now following suit following last month’s abrupt swing. Focussing on the export side, food and capital goods exports continue to lag the average change through the first two months of the year, while industrial supplies, automotive, and consumer goods exports are showing above average gains with the strongest month of the quarter, March, yet to report. Exports rise by 13.6%, on average, in the month of March as industrial production around the globe peaks. While the activity with respect to imports and exports still leaves much to be desired, the trend through the past year with respect to the below average change in imports is certainly conducive to the further contraction in the deficit moving forward, a desire of President Trump.
In other news, Case-Shiller weighed in on the recent rise in house prices. The Corelogic Case-Shiller 20-city House Price Index rose by 0.9% in January, edging out estimates calling for a 0.8% gain. Stripping out the seasonal adjustment, the increase was actually 0.2%, much better than the average change of –0.3% for the first month of the year. This is the strongest start to the year since 2006 when the 20-city index reported a similar 0.2% rise. Above average results were apparent across the regions with only San Francisco lagging the seasonal norm. Seasonally, house prices typically rise between March and September as the weather improves, but with the months of supply suggesting a sellers market, a rare gain has been realized to start what could be the sixth year of above average calendar year returns for the housing market.
Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.87.
Seasonal charts of companies reporting earnings today:
S&P 500 Index