Equities and the Economy

Good morning. The technical support level I identified in my Morning Energy Report on Tuesday (2,030 – 2,045 basis S&P) held on Tuesday and Wednesday and with sellers few and far between buyers stepped in with a vengeance yesterday and U.S. equities posted their biggest daily gain in 5 weeks. Whew. Stocks drove materially higher and put the Dow and S&P 500 back in positive territory for the year. The Dow gained a hefty 260 points (1.47%) ending at 17,895, the S&P added 26 (1.26%) to 2,066 and the Nasdaq was the laggard closing 43 points higher (0.89%) at 4,893. It was the strongest daily rise for both the Dow and S&P since February 3rd. The market blew off a poor retail sales report released yesterday morning. Sales fell for the 3rd consecutive month in February missing forecasts with auto purchases dropping the most in more than a year. I’m not sure how much of the move yesterday was attributed to technical support holding or was it the “bad news is good news” thing with investors interpreting the lousy retail sales as a delay in the Fed hiking rates. Then it could also have been the value of the dollar which retreated vs. the euro after having been on an absolute tear since last Friday’s strong unemployment report. Or it could, and probably was, a combination of the three.

Regarding other economic data, the Labor Department yesterday released its weekly initial jobless claims which came in better than economists’ expectations which was positive but, and I didn’t note this last week, last week’s weekly jobless claims report was lousy. .

This morning we’re getting a little pull back after yesterday’s big move with the Dow down 33 points. Asian stocks all closed healthily higher with the Nikkei setting another record. However, all the European bourses are weak which is dragging equities here in the states lower.

Oil

Crude prices started higher yesterday as the U.S. dollar retreated but then the weak retail sales figures and a private research firm reporting another 2.2 million barrels moved into storage at Cushing brought out the bears. WTI closed $1.12 lower at $47.05 and Brent lost 46¢ closing at $57.08. Not helping the bulls is that Libya’s exports continue to increase. Although only about half of what was exported in 2010, exports there have about doubled since last summer. It appears that warring tribes and factions see the wisdom of keeping their respective fields producing. The situation is however, as politicians say, “fluid.”

WTI is down another $1.23¢ this morning and well below the $50 level it was trading at for weeks. Traders are reacting, i.e., selling, on an IEA report today (not our EIA) noting that oil prices remain fragile due to unrelenting production by U.S. shale producers. In the report the agency said any appearance of stability in oil is tenuous. “On the face of it, the oil price appears to be stabilizing. What a precarious balance it is however. Behind the façade of stability, the rebalancing triggered by the price collapse has yet to run its course and it might be overly optimistic to expect it to proceed smoothly.” Folks, those comments can in no way be construed as bullish.

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA in its weekly storage report yesterday noted 198 Bcf of gas was withdrawn last week. The number came in right at expectations and there was no price reaction in market. Until around noon central time when our private forecasting service (and the one I’ve followed for 20 years and used by most traders) sent out their noon forecast update showing a shift to warmer temperatures in the east in the 11-15 day time frame. The report brought in selling and natty ended down 9 cents at $2.734. Now the noon update is not always adopted by the forecasting service in their subsequent day’s forecast which is the case today for you’ll note the 11-15 day forecast is pretty much the same as yesterday’s. This is putting traders are on the sidelines this morning as they try and ascertain the next material move in natty prices with the April contract 3¢ lower this morning with some of the outer months not even trading. Chatter.

Elsewhere

Happy Pi day! Well actually it’s tomorrow but my Report is not published mañana. Saturday is 3/14/15, or 3.1415, or as we all learned in middle school, Pi. We shall never see Pi day again in our lifetimes. Order up your favorite tomorrow! Have a good weekend.