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Stock Market Outlook for March 28, 2016

 

Excluding transportation, new orders for durable goods is trending above the seasonal average so far in 2016.

 

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:

Republic Services, Inc. (NYSE:RSG) Seasonal Chart

Bancolombia SA (ADR) (NYSE:CIB) Seasonal Chart

Bombardier, Inc. (TSE:BBD.B) Seasonal Chart

Intertape Polymer Group (TSE:ITP) Seasonal Chart

Brookfield Asset Management Inc. (USA) (NYSE:BAM) Seasonal Chart

 

 

The Markets

Stocks ended relatively flat on Thursday as investors refrained from any significant bets in either direction ahead of the three-day long-weekend.  The S&P 500 Index closed lower by 0.04%, led by the financial sector following the downgrade of benchmark constituent Wells Fargo.  For the week, the large-cap benchmark charted its first weekly loss since early February as signs of waning buying pressures becomes apparent.  Momentum indicators are starting to show early signs of rolling over, hinting that sell signals may be soon to follow.  The benchmark tested the previously broken range of resistance between 1990 and 2020, bouncing firmly from this newly defined level of support into Thursday’s closing bell.  Seasonal strength for the broad market concludes in just over one month’s time.

On the economic front, a report on durable goods appeared to provide little to become enthusiastic about.  New orders of durable goods declined by 2.8% in February, which was better than the consensus estimate of a 3.0% fall.  Excluding the more volatile transportation component, new orders were lower by 1.0%, worse than the forecast of a decline of 0.2%.  Stripping out seasonal adjustments, the Value of Manufacturers’ New Orders for Capital Goods Industries increased by 0.6%, which is far less than the average increase for February of 8.2%.  However, as a result of the significant strength in January, the year-to-date change is back inline with the average trend, down 21% on the year.  The value of Manufacturers’ New Orders for Capital Goods – Nondefense excluding Aircraft increased by 7.5% for the month, which is better than the 6.9% average gain for February.  Excluding this more volatile transportation component, the year-to-date change remains above average.  Transportation continues to act as a drag on the overall report, down on the year by 20.5% versus the average decline through the first two months of the year of 10.5%.  And, in rare negative divergence, new orders for defense capital goods fell 10.4% in February versus an average gain of 15.7%.  The year-to-date change for defense goods has instantly shifted from above average to below average, down by 42.3% in 2016 compared to the average decline of 37.4%.  March is typically a big month for each component of the report, accounting for the bulk of the change recorded for the year, therefore it may be best to wait to make any significant conclusions as to the strength of this segment of the economy until the next report is released closer to the end of April.  Until then, despite the lacklustre reading for February, the combination of January and February shows that durable goods orders are performing inline with seasonal norms, which is an upgrade from last year’s below average performance.

Also on the economy, the weekly report on jobless claims was released before Thursday’s opening bell and the trend continues to point in the right direction.  New claims totalled 265,000 in the latest week, unchanged compared to the prior unrevised report and slightly better than the consensus estimate of 268,000.  Stripping out seasonal adjustments, initial claims declined by 2.5%, further pressuring the year-to-date change to –33.4%.  Continued claims were also lower by a similar 2.5%, resulting in a decline in the year-to-date change to –0.5%, the first dip into negative territory for the year.  The change in continued claims is holding marginally below its average trend, suggesting above average strength in the labor market.  Next week is yet another big week for employment data with the ADP monthly employment report on Wednesday and the monthly Non-Farm Payroll report on Friday.

Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.06.

 

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite