Upcoming US Events for Today:
- Durable Goods Orders for February will be released at 8:30am. The market expects a month-over-month increase of 1.0% versus a decline of 1.0% previous. Excluding Transportation, the increase is expected to show 0.3% versus an increase of 1.1% previous.
- Weekly Crude Inventories will be released at 10:30am.
Upcoming International Events for Today:
- German Consumer Confidence Survey for April will be released at 3:00am EST. The market expects 8.5, consistent with the previous report.
- China Industrial Profits for February will be released at 9:30pm EST.
The Markets
Stocks rebounded from recent losses on Tuesday, fuelled by a better than expected read on consumer confidence in the US. Industrials topped the leaderboard, while, despite the positive news pertaining to the consumer, discretionary stocks lagged the broad market move, trading lower in a firmly positive market tape. After a year and a half of outperforming returns compared to the market, the consumer discretionary sector is showing substantial underperformance during a period when seasonal strength is the norm. The 50-day moving average of the Consumer Discretionary ETF (XLY) is curling lower for the first time since June of 2012 as the intermediate trend slowly turns negative. The discretionary sector is a gauge of risk sentiment in the equity market. When compared to its defensive counterpart, consumer staples, signs of risk aversion become clear; the discretionary sector is showing signs of lag versus the staples sector as investors rotate away from the riskier asset. Investors will tend to de-risk portfolios ahead of a potential market peak, leaving equity markets open to declines. The period of seasonal strength for the discretionary sector comes to an end at the end of April, on average, while seasonal strength for the consumer staples sector begins around the same time, ahead of the typical “Sell in May” peak in the broad equity market.
Meanwhile, a gauge of risk for international equities is starting to show signs of strength. Lacklustre performance in emerging markets have played a role in sucking strength away from equity markets here in North America as slowing growth in China raise fears of weak global demand. Price action in the Emerging Market ETF (EEM) has been attempting to break above a declining trendline that stretches back to October of last year, while performance relative to the US market is showing early signs of curling higher. Signs of support in the Shanghai Composite and Brazilian Bovespa are supporting the positive price action over recent sessions. Emerging markets are seasonally strong in the first half of the year, a trend that has yet to materialize.
Seasonal charts of companies reporting earnings today:
Sentiment on Tuesday, as gauged by the put-call ratio, ticked back to bullish territory at 0.75.
S&P 500 Index
TSE Composite
Horizons Seasonal Rotation ETF (TSX:HAC)
- Closing Market Value: $14.46 (up 0.42%)
- Closing NAV/Unit: $14.47 (up 0.53%)
Performance*
2014 Year-to-Date | Since Inception (Nov 19, 2009) | |
HAC.TO | 1.19% | 44.7% |
* performance calculated on Closing NAV/Unit as provided by custodian