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Stock Market Outlook for March 1, 2017

S&P 500 Index has averaged a gain of 1.3% in March over past 50 years; positive in 68% of periods.

 

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:

QUALCOMM, Inc. (NASDAQ:QCOM) Seasonal Chart

Host Hotels & Resorts, Inc. (NYSE:HST) Seasonal Chart

 

 

The Markets

Stocks closed mildly lower on Tuesday, brining an end to a historic 12-day win-streak on the Dow Jones Industrial Average, the longest stretch of consecutive daily gains since 1987.  The session caps off another positive month for major equity benchmarks in the US.  The S&P 500 Index closed higher by 3.72%, the Nasdaq Composite posted a gain of 3.75%, and the Dow Jones Industrial Average tacked on an additional 4.77%, each ending in overbought territory and around all-time highs.  Typically, February is the weakest month of the positive six month seasonal trend for equity benchmarks, but with improving fundamental data and anticipation of pro-business policies from the Trump administration, stocks have defied all bounds.

Looking ahead, the month of March has historically been one of the better months of the year for stocks.  The S&P 500 Index has averaged a gain of 1.3% in this third month of the year, advancing in 68% of periods in the past 50 years.  Returns have ranged from a loss of 10.2% recorded in 1980 to a gain of 9.7% realized in 2000.  Looking through the past 20 years of data, the best performing sectors in this last month of the first quarter are Energy and Financials, each averaging a gain of around 3%.  Materials, Industrials, Consumer Discretionary, and Utilities have each averaged a return of around 2%.  Health Care and Consumer Staples have historically been the laggards, gaining less than one percent over this 31-day period.  The month tends to have a cyclical bias, buoyed by strength in retail sales and industrial production as the economy emerges from the slower winter period. 

In the commodity market, oil tends to play a dominant role in the month ahead as refiners transition from production of winter to summer blend gasoline, drawing down the inventories of the refined product and leading to a peak in the days of supply of the raw input.  Over the past 30 years, the price of WTI Crude has averaged a gain of 4.4% in the month of March, the best monthly return of the year.  The pace of inventory gains through the first seven weeks of the year continues to be concerning, warranting further monitoring before adopting a bullish bias.  Further details on the state of petroleum inventories will be released on Wednesday when the Energy Information Administration (EIA) releases their weekly report.

On the economic front, a report on International Trade was released before Tuesday’s opening bell.  The headline print indicated that the deficit widened in January to $69.2 Billion from $64.4 Billion previous, the result of a 0.3% decline in exports and a 2.3% rise in imports.  Analysts had expected a deficit of $66.0 Billion.  Stripping out the seasonal adjustments, exports actually declined by 7.6% and imports rose by 0.8%; the average change for each during the month of January is –6.1% and –1.8%, respectively.  Strength in the US Dollar through the fourth quarter is likely to have had an influence.  Looking through the details on the export side, weakness appears to be centered with Capital Goods, which declined by 16.2%, the weakest start to the year in the history of the report.  The average change in this category for the month of January is –10.8%.  Other categories showed an above average result, including Industrial Supplies, Automotive Vehicles, and Consumer Goods exports.  Exports remain vulnerable to the strength in the US Dollar, but a number of categories are remaining resilient in the midst of the breakout gains on the US Dollar index in recent months.  The domestic currency warrants careful attention in the weeks ahead as we transition out of a period of seasonal strength and into a period of weakness.  The currency benchmark is presently consolidating above 100, but a short-term head-and-shoulders topping pattern may be in the works as the index shows signs of rolling over from resistance around its 50-day moving average.

Sentiment on Tuesday, as gauged by the put-call ratio, ended bearish at 1.19.  This is the highest level since the days prior to the US Election, suggesting investor caution ahead of Trump’s speech in front of a joint session of congress on Tuesday night.

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite