Equities and the Economy

Wow! Wow. And more Wow! And Yahoo! Driven by a combination of not so subtle hints from the Bank of China of impending QE, some positive economic news in Europe, numerous pharmaceutical mergers were announced before the open and some positive housing data here in the states, U.S. stocks materially higher yesterday with the Dow roaring 264 points (1.49%) higher to 17,976, the S&P 500 jumping 25 points (1.22%) to 2,086 and the Nasdaq closing up 56 (1.14%) to 4,947. I am happy to state this was the first back-to-back positive closes we’ve had in the month of March. Before the open a tsunami of healthcare mergers and acquisitions were announced and you regular readers know that M&A activity is a sign of market strength. Bottom line it was a confluence of factors coming together bringing in new money en masse to the market.

You’ll note the Dow was the big winner today and that was because Apple (now in the Dow from the Nasdaq) made a big move rising 2.53% driving the index higher. Now please help me with this. How does the world’s largest company with a market capitalization of $700 billion rise 2.53%! Over $17 billion of capitalization was created yesterday! Where does one “find” $17 billion?!

Yesterday it seemed like there was a torrent of new money trying to get into the market. Even energy stocks were up, even leading the market higher, and oil prices were flat to down. A sure sign mindless money was being put to work.

Regarding economic data, in Europe UK mortgage approvals rose to a 6 year high suggesting the housing market is picking up and consumer sentiment in Italy hit a multi-year high. Here in the States, pending home sales were up 3.1% in February, driven primarily by sales in the West and Midwest, which was solidly above forecasts. This is the highest level this index has been since the early summer of 2013. The Commerce Department reported consumer spending rose 0.1% in February which was below The Street’s consensus of 0.2%. However, personal incomes rose a nice 0.4% which was 0.1% better than forecasts.

This morning U.S. equities are retracing a bit with Dow futures down 91 points. Those traders who get up at 3 AM to play the momentum game are selling based upon what overseas markets are doing. The Asian markets closed mixed but the European markets are all lower which is why these early birds are selling U.S. equities.

Oil

Oil traders were are on the sidelines yesterday watching for any news on the talks between the six free world powers and Iran over the latter’s nuclear program coming with the possibility of reducing or eliminating sanctions allowing Tehran to ship more oil, into an already over supplier market I might add. The two sides has set today as an interim deadline for an agreement. June 30th is the deadline for the final agreement. Regarding the talks, Russia’s foreign minister, who left the talks in Switzerland on Monday, is planning to return this afternoon and traders are interrupting this as a sign that an agreement might be close and are pushing oil lower with WTI down $1.07.

Natural Gas

The May Nymex natural gas contract began its first day as the prompt month very, very quietly closing down 0.5¢ at $2.644. You’ll note this is about 5¢ higher than the April’s contract expiration. Eyes will as usual be focused on the weather and production with the latter interpreted through the weekly storage reports. You might be sitting there thinking that now that spring is here the bottom will be falling out on natural gas prices, but there’s more going on than you might realize. For example (and here’s a freebie for you infidels who aren’t clients) natural gas consumption this March for electric generation has been the greatest for any March in history.

This morning natty is just chopping around being down 0.4¢.

Courtesy of MDA Information Systems LLC

Elsewhere

Although it’s moved from the “front page” to the “back,” fighting is still going on in Yemen. More specifically, Saudi Arabia is continuing its airstrikes. Once again its Sunni vs. Shi’a, or Iran vs. Saudi Arabia. I thought you might like to know a little more about these sects. It’s estimated that 85% to 90% of the Muslims in the Middle East are Sunni. The Middle Eastern countries with the greatest proportion of Sunnis are Egypt (which is one of the reasons Egypt has said they will join Saudi Arabia on possible ground forces), Jordan and, of course, Saudi Arabia with Sunnis making up 90% of the population.

The Shi’a make up approximately 10% of all Muslims in the Middle East. Iran has the largest Shi’a majority with more than 66 million making up about 90% of the population. The Shi’a are also in the majority in Iraq and Bahrain. There are sizable Shi’a communities in Kuwait, Yemen, Lebanon, Qatar, Syria, Saudi Arabia and the UAE. In countries with Shi’a communities, Shi’a often make up the poorest sections of society and see themselves as oppressed and discriminated against.

On a logistical note, the Morning Energy Blog will not be published tomorrow for I will be out of the office. Catch you on Thursday. Have a nice day.