Technology fuels rally on Thursday, but can the return of strength be believed? Real Time Economic Calendar provided by Investing.com. *** 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: Allergan, Inc. (NYSE:AGN) Seasonal Chart Kellogg Company (NYSE:K) Seasonal Chart Constellation Brands, Inc. (NYSE:STZ) Seasonal Chart Waste Connections (TSE:WCN) Seasonal Chart McKesson Corporation (NYSE:MCK) Seasonal Chart Great Canadian Gaming Corporation (TSE:GC) Seasonal Chart Maiden Holdings Ltd. (NASD:MHLD) Seasonal Chart Altus Group (TSE:AIF) Seasonal Chart The Boston Beer Company, Inc. (NYSE:SAM) Seasonal Chart MFA Financial Inc. (NYSE:MFA) Seasonal Chart Activision Blizzard, Inc. (NASDAQ:ATVI) Seasonal Chart Raven Industries, Inc. (NASD:RAVN) Seasonal Chart The Markets Stocks jumped on Thursday as investors reacted favourably to earnings out of the tech sector, namely AMD and Facebook. The S&P 500 Index gained 1.04%, following through with the reversal recorded in the previous session. The move helps to firm support around the rising 200-day moving average, which was tested at the lows of Wednesday’s session. The question on the minds of investors is whether the tech strength can be believed following weak performance over the past month and a half. We reported previously that indicators for this segment of the economy are showing growth in the first quarter equivalent to the late 1990s, which subsequently led to the tech bubble peak. Thursday’s report on durable goods orders shows that shipments of computers and electronic products in the first three months of the year is 2.2% above average, the third best performance in the past two decades. While the growth is equivalent to tech bubble ramp, the valuations are far from the euphoric values that existed around the start of the year 2000. According to data obtained from Thompson Reuters, the forward P/E of the information technology index sits at 18.3, well below multiples of over 30 seen ahead of the turn of the century. The S&P 500 Technology Sector Index was higher by 2.27% during Thursday’s session and results released from Amazon and Intel after the closing bell suggest further gains on Friday. The benchmark continues to hold above horizontal support around 1100. Seasonally, a number of sector constituents tend to show gains through the volatile summer months, including Intel, which as we reported a week and a half ago begins a period of strength in the middle of April, on average. The growth characteristics of the sector have tended to make this space less exposed to the volatility that is typical amongst cyclical equities between mid-April and mid-July. TECHNOLOGY Relative to the S&P 500 On the economic front, a report on durable goods orders capped off a strong quarter for manufacturing activity in the US. The headline print indicated that sales of durable goods increased by 2.6% in March, well above the consensus forecast that called for a 1.7% rise. Excluding transportation, however, the result was not nearly as upbeat, showing no change versus estimates of a gain of 0.5%. Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for Capital Goods Industries actually increased by 35.4%, well above the 22.3% gain that is average for the month. For the quarter overall, the 3.3% gain is 9.3% above average by the end of March, representing the best start to a year since 2011. Market participants suggested that aircraft orders are skewing the results, but whether looking at the non-adjusted results ex-aircraft or ex-transportation, the change through the first quarter was well above average. Only defense capital goods industries are showing a change that is lagging the seasonal norm. Prior to this report, the year-to-date change in durable orders had not been showing anything notable, but, as we cautioned, the quarter-end typically provides a better gauge of activity as companies seek to push through orders ahead of the important reporting period. Overall, the report indicates that the manufacturing economy is strong, providing a favourable backdrop for risk assets. Value of Manufacturers’ New Orders for Capital Goods Industries Seasonal Chart The strength in the economy has a few different impacts. First is higher rates as inflation and the strength of activity forces the Fed’s hand to push the cost of borrowing higher. This, in turn, fuels a stronger US dollar, which broke out of a consolidation range in recent days. But it is not the level of either that warrants monitoring, but rather the pace of gains that could take a toll on risk assets. Should the gains remain orderly, equity markets may be able to overcome this headwind. It is the risk of an unorderly rise that has investors concerned. Seasonally, the US Dollar tends to weaken through the summer, correlating with the decline in treasury yields. While a stronger US Dollar may not be beneficial to large international companies that record earnings in the domestic currency, the weaker currency did prove to be beneficial to export activity last month. The report on US International Trade In Goods showed that the deficit fell to $68.0 Billion in March, a significant improvement from the $75.9 Billion reported previously. The consensus estimate was for a deficit of $74.5 Billion. A 2.5% increase in exports and a 2.1% decline in imports contributed to the better than expected result. Stripping out the seasonal adjustments, exports actually increased by 16.0% in March, two percent better than the average change for the third month of the year. Imports, meanwhile, increased by 10.5%, below the 13.3% gain that is average. Year-to-date, the change in exports is just about inline with the seasonal trend while imports lag this historical norm, a trend that I suspect the Trump administration would like to see continue. Focussing on the export side, strength appears to be dominated by consumer goods, which are rebounding from the lacklustre activity recorded in 2017. Exports of autos are similarly above average, highlighting the strength of the global consumer in this economy. Last year’s bright spots, however, are seeing growth slow with industrial and capital goods exports trending below average on the year. Seasonally, imports of goods tend to rise through the summer while exports wane into the summer slowdown that dominates activity in July. US International Trade – Imports Seasonal Chart US International Trade – Exports Seasonal Chart Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.82. Seasonal charts of companies reporting earnings today: S&P 500 Index TSE Composite