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Stock Market Outlook for May 9, 2016

 

Consumer credit just realized the largest monthly increase since December 2010.

 

Real Time Economic Calendar provided by Investing.com.

 

**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:

Canadian REIT (TSE:REF.UN) Seasonal Chart

Oracle Corporation (NASDAQ:ORCL) Seasonal Chart

 

 

The Markets

Stocks traded on either side of the flatline during Friday’s session as investors analyzed the latest employment report.  The S&P 500 Index closed higher by 0.32%, bouncing slightly from its rising 50-day moving average.  The benchmark traded to a low of around 2040 earlier in the session, testing that important pivot point that we’ve been highlighting over recent weeks.  The range of support on the large-cap benchmark remains apparent between 2020 and 2040, while resistance is apparent between 2080 and 2100.  The market is waiting for a catalyst to fuel a break, in one direction or the other.

On the economic front, the always heavily scrutinized monthly nonfarm payroll report was released before Friday’s opening bell.  The headline print indicated that 160,000 payrolls were added last month, below the consensus estimate of 200,000.  The unemployment rate remained unchanged at 5.0% and wages increased by 0.3%.  But, of course, the more telling details can be found by stripping out the adjustments, the net result of which presents a varied profile on the state of the labour market.  Non-seasonally adjusted, payrolls increased by 0.74% (or 1.06 million jobs), marginally less than the 50-year average increase for April of 0.8%.  The year-to-date change in payrolls continues to trend around three-tenths of a percent above average, suggesting ongoing labour market strength.  The concern in the report comes with the fact that the strength is being led by low paying opportunities typically found in food services, retail, and leisure/hospitality; oil and gas employment, which had been notorious for high wage employment, remains on the decline and business services, or the so-called “white collar” jobs, continue to show a year-to-date change that is trending below average.  Despite this, the change in average hourly earnings is holding inline with the seasonal average, showing an uptick in April following two months of declines.  Overall, the economy is supporting employment growth above the average pace, but the lack of quality jobs is an important footnote as it could lead to a lag in wage growth in the future, similar to the back half of last year.

As an increasing number of people find work, they are also making purchases on credit.  In a report released on Friday afternoon, consumer credit for March increased by $29.7 billion, the largest absolute increase since December of 2010.  Stripping out seasonal adjustments, Total Consumer Credit Owned and Securitized increased by 0.4%, double the monthly average increase for March of 0.2%.  Consumer credit has been trending firmly above average since the year began, suggesting confidence amongst consumers to repay these obligations.

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.19.  The ratio has been consistently bearish since the end of April as investors protect portfolio positions in the midst of the recent declines in equity prices.

 

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite