Equities and the Economy

Good morning. U.S. stocks have been meandering the last couple of days closing slightly down on Tuesday (although the price action on that day was terrible) and closing slightly up yesterday. As Richard Dawson used to say “Survey Says” Dow up 27 to 17,903, S&P 500 up 6 to 2,082 and the Nasdaq outperforming the other two indexes up 41 to 4,951. The minutes of the FOMC March meeting were released yesterday revealing there is material controversy over the timing of an interest rate hike. This led to some serious volatility around 2:10 EDT with the Dow trading down 50 but then quickly bouncing back (thank goodness) because upon further reading the minutes were peppered with dovish language. In summary, the Fed remains “data driven” and is seeing both positive and negative forces upon the economy which for now are offsetting each other.

Overnight Asian stocks closed mixed with Hong Kong bellwether Hang Seng index continuing its blistering rally rising a huge 2.7% to a seven year high. Folks, that equates to rise of 483 Dow points! That sure would be nice to see! As I mentioned yesterday, a new regulation allowing mutual funds from China to invest in Hong Kong along with the perception Hong Kong shares are cheap compared to the Shanghai is propelling the former’s market. Japan’s Nikkei 225 finished at its highest level since June 2000 and is with 0.3% of crossing the psychologically important 20,000 level. This morning European stocks are all trading nicely in the green but here in the states equity futures are marginally negative with the Dow down 15. Follow the QE.

It’s an important day for Greece. She has a 465 million (euro) loan payment due to the IMF today. By the way, here’s the rest of her payment schedule. Next week on the 14th 1 billion in short term treasury bills need to be rolled over. On the 17th another 1.4 billion in bills needs to be rolled over. On May 1st another 202 million in loans is maturing with the IMF. On May 8th 1.4 billion in bills requires rolling. On May 12th another IMF loan of 771 million is due. And then on May 15th the largest bill maturity of the two month period is due, 1.4 billion. Daunting!

Oil

The DOE released its weekly crude and products report yesterday and incredibly, it confirmed the API’s report of Tuesday evening. The increase in inventories was ginormous! The market was looking for an aggregated increase of 1.3 million barrels and the 5 year average is an increase of 2.15 million barrels. The actual number: an aggregated increase of 11.4 million barrels! That’s the largest build since March 2001! The market responded immediately and properly with WTI falling $3.56, a very material 6.6%, closing at $50.42. Brent lost almost the identical amount $3.55 (6.0%) settling at $55.55. Now remember, two days before on Monday WTI rose $3.00 so large sums of money are being made or lost this week and traders are getting whiplash. A word of caution to the bears. Last week the Houston Ship Channel was closed for several days backing up crude and products into and round the Gulf. So while the DOE numbers were indeed bearish, possibly they weren’t as bearish as might be construed. This morning the oil market is starting out much calmer with WTI up 81¢.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas continued its see-saw action closing down 6.1¢ yesterday at $2.619. Weather forecasts are showing some great spring conditions for the Midwest and east over the next couple of weeks and being we’re in the full throws of spring that means no HDD’s or CDD’s. But remember, it is nuke plant maintenance season. Today is Thursday and you regular readers know that means its EIA natural gas storage report day. The market is looking for a small injection of 11 Bcf. Last year we say a small withdrawal of 8 Bcf and the 5 year average is a 2 Bcf withdrawal. This morning natty is moribund up 0.3¢

Elsewhere

Today is marks a very important day in U.S. history for it was on this day 150 years ago that in the small village of Appomattox Court House in Virginia General Robert E. Lee surrendered to Ulysses S. Grant officially ending the Civil War. More U.S. soldiers died in the Civil War than all the other wars the U.S. has fought combined. A total of more than 600,000 of our ancestors died. As a matter of reference, in the War in Iraq the U.S. lost 4,491 soldiers, 0.7% of those killed in the Civil War. Here’s some trivia I bet you didn’t know. The meeting place for the surrender was the parlor in a house owned by a fellow named Wilmer McLean. Now going back some years you history buffs know that the first battle of the Civil War was at Bull Run. The first shot of that battle was fired by a Union cannon at the house on the farm which Confederate General Beauregard was using as his headquarters. That farm house was owned by none other than Wilmer McLean. The Civil War started in Wilmer McLean’s front yard and ended in his parlor.

Have a nice day.