Equities and the Economy

After getting unabashedly bludgeoned for 7 trading sessions healthcare stocks rebounded yesterday giving the S&P 500 its first gain in 6 days, although it was hardly something to write home to mom about. The S&P 500 gained a tiny 2 points closing at 1,884, the Dow did marginally better adding 47 to 16,049. The Nasdaq remains under pressure falling 26 points finishing at 4,517. Yesterday, for a change, there was little volatility with stocks flitting between modest gains and losses for most of the day.

The Conference Board released its September consumer confidence report with its index rising to 103.0 from a revised 101.1 in August, the highest level since January, surprising forecasters. Unfortunately, it did little to boost the markets. The market remains close to its lows of the year and is set to close out September with its worst quarterly performance in four years. U.S. house prices rose 0.6% in July according to the S&P/Case-Shiller housing index. Portland and Dallas saw the biggest monthly gains among the 20 markets.

I’m tired of Debbie Downer so I’m moving on to today and the last day of the quarter is starting out great! The Asian markets all closed higher with Hong Kong’s Hang Seng and Japan’s Nikkei closing up 1.41% and 2.70%, respectively. Stocks there got a boost on a positive report that Chinese consumer sentiment improved in August to its highest level in over a year. The good mood has spread to Europe where all three major bourses are materially higher being up between 2.30% and 2.80% after their worst two day slide in a month. As you regular readers know, I don’t usually comment on particular stocks but I have to comment on Glencore. Glencore is a huge UK based commodities company. It employees 181,000 employees and contractors, has assets in 50 countries and produces or trades more than 90 commodities. I am familiar with them from my energy trading days. The reason I bring them up is their stock is up 10.29% today, after losing 29% on Monday and 76% for the year! This was all sparked by an Investec analyst suggesting Glencore’s equity value could evaporate against its large debt unless commodity prices improve. On that one day, Monday, Ivan Glasenberg’s, the CEO, net worth fell $478 million. I don’t care how rich you are. That gets your attention.

Locally we’re getting off to a great start with the futures markets of all three major U.S. stock indexes up nicely between 1.39% and 1.74%. As I’ve said too many times, it’s the closes that are most important so let’s hope we get a good, strong close today to end both September and the quarter. The BIG monthly report is coming out Friday, the Labor Department’s Unemployment Situation report, and we got the prelude to it this morning. ADP, U.S’ largest private payroll processing company, reported that private sector companies added 200,000 jobs in September which was above economists’ expectations of 190,000. Additionally, August’s number was revised higher. So indeed this was a positive report.

Oil

Oil prices posted respectable gains yesterday with WTI climbing 80¢ closing at $45.23 and Brent adding 89ٕ¢ settling at $48.23. Oil prices have been sedate for the last month waffling around the $45 mark basis WTI. Yesterday after the bell the API released its crude oi report stating U.S. inventories rose 4.6 million barrels which was above expectations. The report is having no impact on price this morning with WTI down a meaningless 1¢. The more important DOE report comes out today. Technically, WTI is due for a breakout. During the entire month of September WTI has traded within a pennant formation and the trading range is getting tighter and tighter. If I were to bet, I’d bet we break out to the upside.

I’ve often mentioned that it was Saudi Arabia’s policy change after 40 years that changed everything in the oil patch. It was their decision at that time to maintain market share rather than modify production levels to control price that sent oil prices into a tail spin. Let’s take a look at what’s happened to their market share. In 2012 and 2013, Saudi Arabia had just a bit less than 8% of the world’s oil export market. That fell to about 6.5% last year. Now as a result of the big policy change their market share has rebounded back to 7.8%. Apparently their strategy is working.

Courtesy of MDA Information Systems LLC

Natural Gas

The November Nymex Natural Gas contract began its first day as the prompt month on a weak note falling 8.4¢ to $2.586. What we saw yesterday was the November contract converging with the price of the expiring October contract. Natty prices, after rising 15¢ from last week’s 5 month low, are now back within a nickel of that low. Folks, natty is dirt cheap right now!

Temperatures are mildly below normal for the eastern U.S. for the next 5 days but with this being the end of September/beginning of October it’s really not affecting CDD’s or HDD’s. The extended forecast looks pretty normal, and natty prices are acting accordingly being down 2¢. Chatter. Tomorrow the EIA releases its weekly storage report which is almost always exciting!

Elsewhere

Guess who just got on Twitter? Edward Snowden, the former National Security subcontractor who leaked top-secret information about the NSA in 2013. He has about 50,000 followers. His first tweet on @Snowden was “Can you hear me know?” His is only following one account, @NSAGov. To date NSAGov has not followed him back.

Have a good day.