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Stock Market Outlook for April 15, 2016

 

Investors rotating away from defensive sectors as equities touch the highs of the year.

 

 

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:

Franco-Nevada Corporation (NYSE:FNV) Seasonal Chart

St. Jude Medical, Inc. (NYSE:STJ) Seasonal Chart

 

The Markets

Stocks closed flat on Thursday with the price of oil gyrating ahead of this weekend’s oil summit in Doha.  The S&P 500 Index closed higher by two basis points, arguably unchanged, as investors take a breather from the rally over the previous two sessions.  The large-cap benchmark is punching away at a range of resistance that spans between 2080 and 2100, but a catalyst is clearly required to make that final push higher.

While investors debate about the upside merits of stocks given that major benchmarks are at the highs of the year, some of the fear trades have started to wind down.  The price of gold realized a notable decline during Thursday’s session, closing marginally below its 50-day moving average.  And within the equity market, the consumer staples and utilities sectors have resumed a position of underperformance versus the market as investors rotate away from the “risk-off” plays.  Momentum indicators for the two defensive sectors continue to roll over after showing negative divergences over recent weeks.  Seasonally, we are nearing a period that is typically strong for consumer staple stocks as investors become risk averse into the summer months and the utilities sector is presently within a brief period of seasonal strength that sees the sector rise along with natural gas prices.  The technicals clearly have something else in mind after the sizable rally that started the year, pushing both into overbought levels.

STAPLES Relative to the S&P 500

UTILITIES Relative to the S&P 500

On the economic front, a report on business inventories and sales was released on Wednesday, providing insight as to the strength of manufacturers, wholesalers, and retailers.  The headline print indicated that total business sales fell by 0.4% in February, while inventories declined by 0.1%, inline with analyst estimates.  Stripping out seasonal adjustments, total business sales were actually higher by 4.0%, significantly higher than the average gain for February of 1.4%.  Meanwhile, total business inventories rose by 0.2%, much less than the 0.9% average gain for the second month of the year.  Both sales and inventories continue to show a below average change through the first two months of the year, remaining constrained as a result of the low commodity prices realized over the same timeframe.  The widely followed inventories-to-sales ratio remained unchanged over the course of the month, although the trend appears pointed higher, possibly limiting manufacturing activity in the future.  March is typically a big month for business sales and the year to date trend is expected to converge with the average trend as commodity prices firm and manufacturing activity ticks higher.

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.86.

 

Sectors/Industries entering period of seasonal strength today:

S5HOMF Index Relative to the S&P 500

 

Seasonal charts of companies reporting earnings today:

   

 

S&P 500 Index

 

TSE Composite