Equities and the Economy

Good morning and happy Repeat Day. Good morning and happy Repeat Day. It was another choppy day with day traders pushing the market up and down looking for stops, which they didn’t find. The range of the day was 167 points but stocks ended up pretty much unchanged from Thursday with the Dow falling 28 to 18,012, the S&P 500 off 6 to 2,110 and the Nasdaq down 6 to 5,077. Chatter. The was little economic data released yesterday with the only report of materiality being Factory Orders by the Commerce Department which came in below Wall Street’s expectations for April at -0.4%. Disconcertingly, orders for nondefense goods excluding aircraft, which is a proxy for business investment, fell 0.3%. Not encouraging.

But things are encouraging the morning for although Asian markets closed mixed the European markets are rallying and the Dow is up big, 131. Driving the markets higher this morning is the release by ADP of its Employment Report for May which showed that private-sector employment picked up in May with businesses adding 201,000 jobs. Now this is pretty much in line with expectations and although April’s number was revised down 4,000 to 165,000, May’s 201,000 is the most in four months and shows the job market is on solid footing. At the current pace of job growth the economy will be back to full employment by this time next year. I’m sure the Fed is taking note of that fact. The Fed is also keying on wage growth which they’ll see on Friday and which has been anemic during this entire recovery. As I’m stated before, ADP’s report is very important because its looked at as a clue as to what the Labor Department’s employment report will look like. History has shown that although the two reports can differ markedly for an individual month, over time there is a very high correlation.

On a logistical note, the Morning Blog will not be published the next couple of days for the author is travelling. However, you need to keep a close eye on the news for three very significant events are happening and they all occur on Friday. The three are: the Labor Department’s monthly Employment Situation Report for May, Greece’s deadline to make its debt payment and the OPEC meeting.

Oil

Oil prices rallied once again yesterday with WTI climbing $1.06 closing at $61.26 and Brent added 61¢ settling at $65.49. Yesterday’s gains are no question attributed to the comments of the newest member of the Board of Governors of the Federal Reserve Bank, Dr. Lael Brainard. Her voice is important for she is a voting member of the FOMC. Her comments during a speech she made yesterday pummeled the dollar (vs. other currencies). Now you may not know this but the dollar’s value relative to other currencies is the Treasury’s domain. Technically the Fed is to have little to say about the dollar and in the past the Fed spoke’s people have pretty much refrained from commenting on the dollar. Ms. Brainard has trumped that tradition. And if anyone at the current Fed has the background to do so, it is she. Dr. Brainard’s previous position before she came to the FOMC was in Treasury with the position of U.S. Under Secretary for International Affairs. This position is the focal point of the Administration’s policies on the dollar. She has obviously brought that focus to her position at the Fed. Summarizing her comments yesterday, she commented that the dollar’s appreciation and its concurrent effect on exports delays the return of interest rates to more normal levels. On the news the dollar got whacked, and hard. (didn’t help my long dollar/short yen position. But it’s still nicely profitable).

Looking at oil prices from a little more longer perspective, we’ve really been in a range from about $57 to $62 since late April. This morning WTI is down 42¢ on last night’s after the bell report from the API which showed and unexpected build nearly 2 million barrels of crude inventories. Today the DOE releases its more important crude and products report. As I mentioned previously, OPEC meets Friday. Don’t expect any changes in quotas. They will stay the course.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices chopped around from losses to gains ending the day up 4.9¢ at $2.698. We hit a one month low intraday yesterday at $2.599 but buying came in. The market seems comfortable once again around that $2.70ish level. Tomorrow the EIA releases its often market moving storage report at 9:30 AM CDT with the market expecting a build of 121 Bcf which would be way above the 5 year average of 92 Bcf and the largest in at least 5 years. Now although that is a “big” number remember it’s how actuals come in vs. expectations that move markets for expectations are built into the price going into a report. This morning natty is down 4.4¢.

Elsewhere

Being this will be the last Blog for the week I’ll leave you with some quite interesting tidbits.

The average four year old asks over four hundred questions a day.

A TI-83 calculator has six times more processing power than the computer that landed Apollo 11 on the moon.

Google’s founders were willing to sell to Excite for under $1 million in 1999. Excite turned them down.

The total weight of all the ants on earth is greater than the total weight of all the humans on the planet.

Velociraptors, those vicious and cunning killers that scared the heck out us in the movie Jurassic Park, were really only the size of a turkey and bore feathers .

Have a wonderful rest of the week and weekend.