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Stock Market Outlook for July 18, 2017

Empire Manufacturing survey shows that the summer factory shutdown period is in full effect.

 

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:

  • No stocks identified for today

 

 

The Markets

Stocks closed flat on Monday as investors held the tape steady ahead of a busy week for earnings reports.  The S&P 500 Index shed a mere basis point (0.01%), maintaining position around the all-time high charted during Friday’s session.  The small-cap Russell 2000 index was the lone player in the all-time high club on Monday as the benchmark added close to two-tenths of one percent to end the session at 1431.60.  The small-cap benchmark has lagged its larger-cap counterpart through the first half of the year, a rather peculiar outcome given the potential benefits that these domestically focussed companies would benefit from under the “America first” agenda proposed by President Trump.  Looking at the chart of the performance of the Russell 2000 versus the S&P 500 Index, the small-cap benchmark sharply outperformed the large-cap index in the days following the US election, but for the past 7 months the gains have consolidated around the previously broken declining trendline resistance.  The potential is there for this new-found support to fuel a renewed trend of outperformance into the back half of the year, assuming investor risk tolerance were to remain upbeat.   The small-cap benchmark has historically been an effective gauge of investor risk sentiment given that the index often trades at a higher beta than the market.  Seasonally, the Russell 2000 Index tends to underperform the S&P 500 Index, on average, between now and the end of September.

On the economic front, New York’s regional manufacturing survey showed that the summer factory shutdown period is in full effect.  The general business conditions index of the Empire Fed Survey fell to 9.8 in July from 19.8 previous.  Stripping out the seasonal adjustments, the manufacturing gauge remained in positive territory at 1.6, above the average read for this time of year of –4.5.  This is only the second time in the past decade that July has seen a positive print, a signal of expanding manufacturing activity. July typically sees factories close, in some cases for re-tooling, resulting in a notable slowdown to economic activity.  So while the slowdown is still apparent versus the results released earlier this year, the positive, above average read suggests that factory activity is still humming, possibly cutting short the period that employees are out of work.  Manufacturing activity typically bounces back in the month that follows as manufacturers get back to work producing goods for the back half of the year.

Sentiment on Monday, as gauged by the put-call ratio, ended close to neutral at 0.99.

 

 

Sectors and Industries entering their period of seasonal strength:

UTILITIES Relative to the S&P 500

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite