Equities and the Economy

Good morning and happy National Scrabble Day. It was a nice day for your portfolio on Friday with the Dow logging a hefty 99 points gain (0.55%) closing at 18,058, the S&P 500 rose 11 (0.50%) to 2,102 and the Nasdaq climbing 22 (0.4%) to 4,996. Note the Dow is once again over 18,000, for the first time in April, and the Nasdaq is within a smidgeon of 5,000. It was actually the second consecutive week the main benchmarks closed higher. Looking back over the week what really supported the market was M&A activity with Shell’s acquisition of British Gas and GE’s announcement on Friday of a major restructuring of GE Capital, including the sale of most of the unit’s assets, that sent the stock up 10%. GE Capital is the largest lender in the U.S. outside of banks. Remember, M&A activity boosts investor confidence. On another note, want to feel helpless? High frequency trading has accounted for 47.5% of April’s daily trading volume to date. Actually, this is down from its peak levels in 2009 when 61% of the average daily volume was executed by high frequency traders. (If you want to read a great book about this subject read “Flash Boys” by Michael Lewis. Short, good, fascinating, fun read.)

Overnight China’s Shanghai and Hong Kong’s Hang Seng have skyrocketed with the former gaining 2.17% and the latter 2.73%. China’s market soared on, get this, bad economic news (boy that sounds familiar). The Chinese government reported that exports fell 15% year-on-year in March and imports fell 12.7%. The exports figures compares to an expectation of +12.0% so this is a big miss. The imports expectation was for a small rise. Imports are now the worst since May 2009 at the very end of the global recession. So what does this mean? Calls for greater stimulus by the government and we all know, or should by now, that equities just love stimulus.

This morning is starting off a little shaky with Dow futures down 37 and unfortunately following more the European equities than Asian with the former waffling around unchanged.

Oil

Oil traders were happy to go home Friday after a wild week of swings ending with gains on Friday of 85¢ at $51.64 and Brent really shooting higher adding $1.30 to $57.87. It was the 4th consecutive weeks of gains for WTI as fears of a nuclear deal with Iran could result in a near-term flood of crude onto the market faded. This particularly boosted Brent. WTI once again got support from the Baker Hughes rig count report on Friday showing another weekly drop in the rig count. 42 rigs were laid down in the U.S. now totaling a decline of 760 rigs. At this time last year there were 757 more rigs working.

This morning WTI is again climbing being up $1.04 with traders banking that the lower rig count will decrease production in the future. Remember, the question every trader always ask is “What is the propensity for prices to go higher or lower from the current price?” Oil traders think higher.

Courtesy of MDA Information Systems LLC

Natural Gas

After Thursday’s drop in price due to the EIA storage report natty was moribund on Friday falling 1.7¢ settling at $2.511, a new 2.5 year low. Natty prices have felt the weight of healthy production, particularly in the Marcellus, and the lack of demand due to the shoulder season. Nuclear plant maintenance is in full swing and gas continues to displace coal in electric generation. Bottom line, we should start to see some healthy storage injections in the Consuming Region (an EIA category) beginning this week. Natty is up 1.7¢ this morning.

Elsewhere

Here’s a strange one for you. Martin Jones, an Englishman, had lost his power of vision and remained blind for almost a decade. He has now regained his power of vision. This has been accomplished by implanting a piece of tooth in his eye. The tooth that was implanted was a canine tooth which is also known as the “eyetooth”. A living canine was pulled out of Martin Jones’ own mouth. They then placed a man-made eye lens into its base and placed it under the lid of his eye and let the tissue grow over the canine. Also a little flap of his skin was taken from his mouth and implanted over the tooth in his eye which later had access to its own supply of blood. The doctors then cut a hole in the cornea that permitted light to enter the eye. This very procedure gave six hundred people the power of vision.