Trying to find as much info about the U.S. consumer, given its importance for the economy. The Richmond Fed surveys retailers within the Fifth District:
Retail sales rose sharply this month [March], driving the index to 36 from February’s reading of 18. Big ticket sales also strengthened, bringing the index to 18 from 11. Shopper traffic was heavier; the indicator added three points to end at 35.
Retail employment increased robustly this month, raising the index to 26 from February’s reading of 13. Average retail wages rose modestly, however. The index edged up to a reading of 4 compared to last month’s index of -1.
Justin Trudeau has pledged C$60bn (US$46bn) in new infrastructure spending over the next 10 years, hoping to revive sluggish growth in Canada’s resource-rich economy. (…)
The finance minister forecast that the stimulus would raise gross domestic product 0.5 per cent in the coming year and 1 per cent in 2017-18, creating an estimated 100,000 jobs over two years. The Bank of Canada had predicted growth of 1.4 per cent for 2016-17, not accounting for the new spending. (…)
The government said its deficit would deepen in 2016-17, to C$29.4bn, or 1.5 per cent of GDP, but pledged to cut the deficit in half by 2020-21. In February it had said that the economy’s stumble had widened its projected shortfall to C$18.4bn. (…)
S&P/TSX: Trading on oil like never before
The S&P/TSX has surged more than 12% since its January 20 low, the biggest rebound in over seven years. Oil prices have played an unusually large role in buoying Canadian equities. As today’s Hot Chart shows, the correlation between daily changes in the S&P/TSX and oil prices (WTI) currently stands at an historical high of 0.75. Canadian banks, who account for 23% of the equity benchmark (vs. 19% for the energy sector), have seen their correlation with the price of oil explode to 0.65 – also an historical high. (NBF)
“Historic” investment cuts taking place now increase the possibility of oil-security surprises in the “not-too-distant” future, Neil Atkinson, head of the IEA’s Oil Industry and Markets Division, said in Singapore on Wednesday. About $300 billion is needed to sustain the current level of production, and nations including the U.S., Canada, Brazil, and Mexico are facing difficulty in keeping up investments, he said.
“We need a lot of investments just to stand still,” Atkinson said at the launch event of SIEW 2016. “There’s danger as we are reaching a point where we are barely investing upstream. If investment doesn’t resume in 2017 and 2018, we can see a spike in oil prices as oil supply can’t meet demand.” (…)
U.S. crude stockpiles are at 523.2 million barrels, the highest level since 1930, according to data from the Energy Information Administration. Supply and demand will move closer to balance in the second half of this year, according to Atkinson.
The oil market will be balanced in 2017 and stockpiles will fall from 2018 to 2021, Atkinson said. Global demand will grow 1.2 percent a year in the five years to 2021, compared with 1.7 percent annual growth in 2009 to 2015, he said. (…)
Among the world’s 63 major stock indexes, 28 with a combined value of $28.5 trillion are in bull markets. Another 10 with $4.3 trillion are poised to join them.
Global shares are rebounding from the worst January plunge in seven years as oil prices recovered and the Federal Reserve slowed the path of interest-rate increases, adding to signals the world’s major central banks remain dovish. That helped to ease investor concern over the drag on the world economy from China’s weakest growth in a quarter century. The MSCI All-Country World Index has jumped 12 percent since its Feb. 11 low.(…)
Technical analysts, who look at patterns and trends in the numbers to divine where the market is headed, have been particularly critical of the breadth of this rally, suggesting that large parts of the market weren’t participating in the broad market’s chug higher.
But, as shown in this chart, courtesy of Yardeni Research, Inc. nearly 60% of stocks in the S&P 500 have topped their 200-day moving averages as of the end of last week. That compares with 20% in mid-January.
The S&P 500 also breached its 200-day moving average last week, as did other indexes. An increasing number of stocks climbing over that hurdle along with the index is a sign the rally is spreading.
Further, as of Monday’s close, 93% of S&P 500 stocks traded above their 50-day moving average, a reading that’s happened on just 0.5% of trading days since 1990, according to Bespoke Investment Group. Such readings are typically good for stocks over the next three to six months, though they haven’t necessarily portended short-term gains, according to the research firm.
That said, skeptics will still find reason to doubt the sustainability of the rally. Yardeni notes that for the 200-day average, “the good news for the bearish technicians is that most of those averages are still in downtrends.”
Another point in favor of widening breadth: The ratio of stocks advancing to those declining has been climbing on the New York Stock Exchange. According to strategists at UBS, led by Julian Emanuel, that’s “likely a sign of further equity market gains to come in the weeks ahead.”
(…) Meanwhile, technical analysts who look at charts to divine the direction of stocks have joined the doubters; some are urging clients to proceed with caution when it comes to U.S. equities.
Analysts at Bespoke Investment Group noted that while the latest rally has pushed more than 93 percent of stocks in the S&P 500-stock index above their 50-day moving averages—which smooths out price moves over the past 50 days—there may yet be cause for concern. The strongest moving average reading since the start of the bull market in 2009 is not necessarily a bullish sign for markets, they warned, as it could indicate that stocks have surged past fair value.
“In the coming weeks we expect this breadth measure to cool off a bit as the market works off extreme overbought measures. If you’ve been waiting to buy and haven’t yet, it’s best to wait for a pullback at this point,” Bespoke analysts wrote in a note.
Still, Bespoke is far from bearish. The research firm points out that greater breadth is positive for the market’s strength over a longer-term time frame.
“Strong breadth is a sign that all stocks are participating instead of just a few,” the team said. “This action is the complete opposite of the weak breadth we saw in the early part of last year when the S&P 500 was making new highs but fewer stocks were doing the same. Eventually, we saw a significant correction later in the year.”
Technical Analysts at UBS AG seem far less optimistic.
“With the rally of the last few weeks and looking at our daily trend work, the S&P 500 has reached its most overbought position since 2009!!” wrote analysts Michael Riesner and Marc Muller, with added grammatical emphasis. “We see the market vulnerable for a significant reversal this week, which we would see as the beginning of a tactical top building process and subsequent correction into deeper [second quarter]. We reiterate … [that we] would not chase the market on current elevated levels.”
They recommend that investors sell now, rather than await further price increases.
To sum up:
Meanwhile, the earnings picture for Q1’16 is not improving at all. Thomson Reuters’ tally now says EPS will decline 6.9% YoY vs – 6.7% one week ago.