Equities and the Economy

Good morning. So more good economic news came out yesterday. The Labor Department said U.S employers advertised the most job gains in 14 years and more workers quit, both signs of a steadily strengthening job market. Job opens rose 2.5% to nearly 5 million, the most since January 2001. The number of people who quit their jobs increased 3% to 2.8 million, the most in 6 years. Wonderful news! And U.S. equities get absolutely decimated! The Dow lost 332 points (1.85%) ending at 17,663, the S&P 500 fell 35 points (1.7%) to 2,044 and the Nasdaq finished 83 points lower (1.67%) at 4,860. It was the Dow’s biggest one day drop in 5 months and it was the S&P’s biggest daily decline since January 5th. Both the S&P and Dow are now negative on the year with the S&P down 3.5% from its March 2nd closing high. Investors and traders are very jittery about the Fed and their expected rate hike. However, I believe that was simply the catalyst for investors and traders to hit the sell button. Every professional trader and investor knows the bull run has been 6 years running now, one of the longer ones in history, with no correction and they don’t want to be the last one off the bull train. There was some bad economic news released yesterday that didn’t help us. Inventories of wholesale businesses rose 0.3 % in January after no change in December and a 0.8 increase in November per the Commerce Department. That’s not positive but really is only mildly negative. The really bad news came in the form of sales which were down 3.1% in January which followed a 0.9% decline in December. The January decline was the largest decrease since sales fell 3.6% in March 2009 which is when we were in the depths of the Great Recession.

This morning the major European bourses are all trading very nicely in the green with Germany’s DAX and France’s CAC 40 but big, 1.75% and 1.78%, respectively. Food for thought. European equities have performed way better than U.S equities this year. Remember, it’s all about where “growth” is. You might want to look at that. I guess the rule is “follow the QE.” Locally, U.S. equities are holding in there with the Dow up 48 points. As I’ve said often, closes are much more important than opens. As of yesterday’s close we’re right in the middle of the first major support area which is 2,030 to 2,045 basis S&P. Even with this correction we’re still in a bull market but this area has to hold or we have a new ballgame. By the way, CNN’s Fear & Greed Index, which I think is a wonderful indicator of investor sentiment, has moved down to neutral. I wish it was lower on this down move.

Oil

On the heels of equities fall oil got whacked with WTI closing down $1.17 at $48.29 and Brent off even more, $2.14, at $56.39. For those of you who are more recent readers, I follow Brent for it now is regarded as the global index for oil. WTI is much more a North American regional index. Not helping WTI is that the U.S. dollar hit a nearly 12 year high vs. the euro to the chagrin of not only farmers, oil and gas producers and miners but also the multi-nationals. The latter have been noting in their “guidance” that their sales are being impacted by the strength of the dollar. Volkswagen and Siemens have got to be loving it.

The API released its crude and products report with it again coming in bearish. The report showed aggregate inventories rose 3.0 million barrels with the 5 year average for this week being a decrease of 2.7 million barrels for a net gain of 5.6 million barrels. WTI seems to be taking the data in stride with it being up 23¢ this morning. The DOE figures come out today.

Courtesy of MDA information Systems LLC

Natural Gas

After getting bludgeoned on Monday natural gas rebounded with the weather forecast yesterday which showed below normal temperatures expanding into more of the east in the 11-15 day time frame. The April contract settled at $2.732, up 5.4¢. This morning the 11-15 day forecast is showing the below normal temperatures continuing to expand which is pushing prices up 4.3¢ this morning. Traders will be getting their books in line today ahead of tomorrow’s EIA storage report which will definitely show another hefty withdrawal. But remember, it’s where the actual number comes in relative to expectations that’s important. Natty has really been very quiet recently and if I was a trader I’d be looking to put my capital to use in a different product. Bigger bang for the buck.

Elsewhere

In an EIA report I read yesterday the agency reported that in 2015 electric generating companies are expected to add more the 20 gigawatts of utility scale generation. The additions will come in the form of wind (9.8 GW), natural gas (6.3 GW) and solar (2.2 GW). Here though is what caught my attention. Nearly 16 GW of capacity is expected to retire, 81% (12.9 GW) of which is coal-fired primarily the result of the implementation of the EPA’s Mercury and Air Toxins Standards (MATS) this year. Have a good day.