Equities and the Economy

Good morning. As I’m sure you know, yesterday the U.S. stock market was closed for President’s Day so we need to go back to Friday for the last price action. On that day stocks closed marginally higher with the Dow climbing 47 points to 18,019 and the S&P 500 rising 9 points to 2,097. Although those small gains were enough they were enough to lift the S&P 500 to a record closing high while the Dow finished above 18,000 for the first time this year and closing in on its record high which is 35 points away. The Nasdaq also posted a banner day rising 36 points to 4,894, its highest level since March 2000. Friday’s move higher helped the three indexes finish with weekly gains for the second consecutive week.

Equities have bounced back in February from a bleak January on a rebound in oil prices which climbed again on Friday. U.S. stocks also got a boost on a report the eurozone economy picked up in the 4th quarter thanks to better growth in Germany and Spain. The economy there grew 0.3% in Q4 compared to the previous quarter beating economist’s expectations. Also on Friday Greece and its creditors in the 19 country eurozone took some steps, albeit them modest, to bridge their differences.

Things are getting a little bit frothy out there folks. The price-earnings ratio for next year’s earnings for the S&P 500 companies is 17.1, the highest level in more than a decade. Keep those trailing stops tight amigos.

The Dow is down 32 this morning possible be driven by oil prices which are lower. As I’ve mentioned previously, the equity markets are taking at least some of the queue from oil prices.

Courtesy of MDA Information Systems LLC

Oil

Oil continued to climb Friday with WTI closing $1.57 higher at $52.78 and Brent climbed $1.17 settling at $61.41. This is the first time Brent has settled above $60 since late December. Prices got a boost on Friday with the world’s’ three big energy agencies (EIA, IEA and OPEC) forecasting higher demand for OPEC crude this year. Additionally, the aforementioned positive economic news out of the eurozone goosed the bulls. Baker Hughes released it weekly rig count report Friday showing the rig count continues to plummet with 97 less rigs operating than the week before. There are now 648 less rigs working this year than at this time last year. That’s 27% folks! This WILL show up in future production, and traders know it. This morning WTI is retreating being down $1.67.

Natural gas

With the record breaking cold weather bearing down on the Midwest and Northeast traders didn’t want to go into the weekend short and bid natural gas up 9.1¢ closing at $2.804. This morning it’s down 4.0¢. We’re trading $2.80ish with tons of purple on the weather map for the next 10 days. Hmmm. The bulls better bank on bullish storage reports. Have a nice day.