Equities and the Economy

Good morning and happy National Strawberries and Cream Day. It was another choppy session yesterday as modest post-Fed minutes gains evaporated by day’s end. The Dow lost 27 points to 18,285, the S&P 500 fell 2 to 2,126 while the Nasdaq squeaked out a gain of 2 to 5,072. There wasn’t much economic news yesterday but the highlight was the release of the minutes of the Fed’s last meeting which was April. The minutes revealed that a rate hike in June is “unlikely” with the central bankers concerned about weak growth during Q1. The minutes were really not a surprise simply confirming investors belief any rate increase would not come at the June meeting. Once again the Fed stated any move is “data dependent.” The “dovish” minutes briefly sent all three equity indexes into record territory, however, as previously stated, they could not hold onto their gains.

Overnight Asian stocks closed mixed with China’s Shanghai up 1.87% on the release of China’s Purchasing Manager’s Index from HSBC/Markit which came in at 49.1 for May. This is the third month in a row it’s come in below the all-important 50 level separating growth from contraction. Chinese equities rallied because the report will give government officials the green light to provide more QE and the QE money will flow into equities before plant and equipment. By the way, Japan’s Nikkei hit a new 15 year high yesterday.

European equities are flat to down and U.S. equities are doing the same with Dow futures down 27. Bottom line is that this week has been very, very quiet.

Oil

Yesterday the DOE released its weekly crude and products report which was quite bullish. All three categories (crude, gasoline and products) showed inventory reductions with the aggregate a 5.91 million barrel decline. This was greater than analysts’ estimates and nearly 6 times more than the historic norm. This is the third consecutive week inventories have declined. The report also stated U.S. crude production declined 112,000 bbls from the previous week. The report sent futures prices higher with WTI rising 99¢ closing at $58.98. Brent gained a bit more, $1.01, settling at $65.03.

This morning we’re getting some follow through with WTI up 83¢ which is down from the $1.04 earlier today. WTI is once again banging against the $60 level.

Courtesy of MDA information Systems LLC

Natural Gas

That technical trader who shorted natty on Tuesday because of the “reversal” and was out of the money yesterday morning ended the day in the money with the June contract closing down 3.3¢ at $2.915. Natural gas prices have retreated 20¢ after hitting a four month high of $3.10 earlier this week. Today is EIA storage report day and the market is looking for an injection of 94 Bcf which is below last year’s 106 Bcf but above the 5 year average of 89 Bcf. The last couple of storage reports have come in bullish so let’s see if that trend continues today.

The weather forecast remains unchanged with above normal temperatures forecasted for the eastern third of the nation in the 6-15 day time frame resulting in an increase of natural gas burns for electric generation. This morning natty is up 4.3¢ ahead of the storage report.

Elsewhere

It wasn’t a good day yesterday for four Wal-Mart heirs. At least on paper. Yesterday Wal-Mart posted Q1 earnings which missed analysts’ estimates and the stock price fell 4.4%. This resulted in Alice Walton, Jim Walton, Rob Walton and Christy Walton collectively losing $5.7 billion in net worth yesterday! Actually it’s not been a very good year for the four for Wal-Mart’s stock is down 11% this year translating into a loss of $14 billion for the four. Now I’m sure this hasn’t resulted in them adjusting their lifestyle but a billion here and a billion there adds up! Have a nice day.