Live Markets: Fiscal support seen keeping industrials and defense stocks bid

Mastech Digital

16/05/2023 14:24

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      U.S. equity index futures modestly red: Dow off ~0.4%
    

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      U.S. Apr industrial production MM > est
    

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      U.S. Apr capacity util in-line with est
    

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      U.S. Apr manufacturing out MM > est
    

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    FISCAL SUPPORT SEEN KEEPING INDUSTRIALS AND DEFENSE STOCKS
BID (0919 EDT/1319 GMT)
    Citigroup says structural fiscal support could be an ongoing
tailwind for industrial and defense companies, despite the
potential for some near-term policy-related turbulence.
    A debt ceiling deal in the near-term and an increased focus
on "industrial policy" longer-term, could ultimately garner some
bipartisan support said analysts at Citi, led by Andrew
Kaplowitz, in a note.
    They pick Quanta Services  PWR.N , MasTech Inc  MHH.A , KBR
Inc  KBR.N  as winners among engineering and construction
companies. 
    Lockheed Martin  LMT.N , General Dynamics  GD.N  and
Northrop Grumman  NOC.N  should be well-positioned to benefit
from defense remaining a priority even in an era of potentially
slower overall budget growth, Citi says. 
    
    (Reshma Rockie George)
     *****
    
    
    NASDAQ COMPOSITE: STILL CHUGGING ALONG (0901 EDT/1301 GMT)
    The Nasdaq Composite  .IXIC  ended Monday at its highest
level since late-August of last year. Additionally, the
tech-laden index is on track for a fourth-straight weekly gain.
    With this, one measure of the Nasdaq's internal strength
continues to confirm what is now a more than 20% advance off its
October intraday low:
    
    
    The IXIC ended Monday at 12,365.209 which is its highest
close since August 25, 2022, when it finished at 12,629.265.
    The August 25 close was one day prior to Fed chair Powell's
hawkish Jackson Hole speech. On August 26, the IXIC hit an early
intraday high of 12,655.836 before then resuming a slide that
would ultimately lead to new lows.
    The Nasdaq New High/New Low (NH/NL) index  .AD.O , on a
monthly basis, bottomed in October at 14.5%. The Nasdaq formed
what stands as its bear-market intraday low that month.
    The NH/NL index has now risen to 31.4% and is on track to
rise for a seventh-straight month. With this, the measure's
seven-month rate-of-change (ROC) is currently its third
strongest reading coming out of a trough since the mid-1990s.
Only the upturns out of its 2003 and 2009 troughs were stronger.
    This measure certainly has a lot of room to rise before
reaching previous peaks. And even then, in a number of
instances, including its most recent top in 2021, the Nasdaq
moved still higher, while the NH/NL index, on a monthly basis,
diverged.
    With about half of May trading to go, bulls will want to see
this measure continue to rise. However, a down-tick in the ROC
may signal that the period of easier gains has passed. 
    A down-tick in the measure itself, followed by a break below
its 10-MMA, which has now risen to 22.3%, could coincide with a
return of much more intense IXIC pressure.

    (Terence Gabriel)
     *****
 
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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)