Equities and the Economy

Good morning. Rally on, baby, rally on! Yesterday the Dow scored its biggest daily rise in about a month jumping more than 300 points and the S&P 500 finished with gains for the 5th consecutive session, its longest winning stretch since last December. When the bell rang ending the day the Dow posted a huge gain of 304, 1.84%, closing at 16,776, the S&P 500 added a big 36 points, 1.83%, to 1,987 and the Nasdaq finished up 1.56%, 73 points, at 4,781. The Nasdaq’s gain put the index positive for the year. Interestingly, these past 5 days of gains followed 5 consecutive days of losses. Energy stocks were the big gainers with bargain hunters coming in driving the sector 2.9% higher. Friday’s jobs report shirted the sentiment in that market with the bet now that the Fed will not raise interest rates until 2016, despite what Fed Chairwoman Janet Yellen has stated. However, her comments were all before this latest lousy jobs report. There’s actually an index for folks think interest rates will rise. It’s called the Fed Funds futures which is pricing in only a 7% probability of a rate increase in October, down from 14% before the report, and only a 30% chance in December. Also, the strong technical reversal on Friday changed perception amongst traders and investors resulting in an increased appetite for risk.

Regarding fundamental economic data, the only important report of significance yesterday was the Institute for Supply Management reporting its index of service sector activity fell from 59 in August to 56.9 in September, with expectations of 57.5. Although somewhat disappointing, the index is still significantly above 50 which indicates expansion.

I guess all the “fast” money was spent over the past 5 or so sessions for this morning equities around the world are much more sedate. The Asian markets closed mixed in a range from -0.10% to a gain of 1.00%. The European markets are much more quiet. While all are in the green the range is only 0.19% to 0.38%. Here in the U.S. quiet also prevails with the three major indexes trading very close to yesterday’s settles. The talk in the market is that since bouncing hard off the August 24th “flash crash” low last Friday we may be in a trading range with the 2,000 level basis the S&P being resistance.

Oil

Oil prices rallied on the coattails of equities yesterday with WTI rising 72¢ (1.6%) closing at $46.26 and Brent adding more, $1.12 (2.3%), to $49.25. Interestingly, oil prices didn’t rise nearly as much as the oil stocks. For example, Marathon Oil rose 8.3% and Murphy Oil gained 5.1%. In addition to equities strength, buyers came in on the announcement from Russia that it is now prepared to meet with OPEC and non-OPEC oil producers to discuss oil markets, if such a meeting is called. Previously Russia had been unwilling to cooperate with OPEC. A separate meeting between Russian and Saudi officials is being planned for the end of October. Russia is the world’s third largest producer of oil.

According to a report this morning Russian oil production hit 10.74 million bpd last month, a new record high. However, with the U.S. rig count continuing to erode and the EIA showing U.S. oil production is beginning to decline traders are playing it from the long side and WTI is up another 26¢ this morning. Crude futures are now more than $10 up from their six year lows in late August. Also helping oil, and all commodities priced in the U.S. dollar, is a weakening U.S. dollar vs. other currencies. The U.S. dollar fell on Friday after the jobs report with the expectation the Fed would not be raising interest rates this month, or maybe for the remainder of last year.

Courtesy of MDA Information Systems LLC

Natural Gas

The November natural gas price ended little changed yesterday closing down a tenth of a penny at $2.450. Interestingly, there was buying in the deferred contracts with the calendar 2016 and 2017 strips up 1.4¢ and 2.0¢, respectively. The cash market was a little stronger yesterday lending support to prices. That being said, natty is cheap right now.

Today’s weather forecast is very similar to yesterday’s continuing to show above to much above normal temperatures from now through October 20th for the western 2/3rds of the nation with slightly above to normal temps in the more important eastern third of the country. Bottom line: no natural gas load. The only load this month will be the natural gas necessary for electric generation needed to replace nuclear power plant generation which is down for their regular refueling cycle. Natty is up a half cent as I write.

Elsewhere

You probably didn’t know this but on October 1st the U.S. joined the International Statistical Classification of Diseases and Related Health Problems of the World Health Organization. On that date the U.S. adopted the medical codes for accidents and injuries of the myriad thousands that humans experience. Per the Washington Post, “physicians’ offices, hospital systems and the federal government have spent billions on training to get ready for this this transition.” I thought you’d be interested in some of the codes for injuries.

R46.1: bizarre personal appearance

R46.0: very low level of personal hygiene

W22.02Xa: walked into a lamppost; initial encounter

W.22.02XD: walked into a lamppost; subsequent encounter (this person really needs get off his or her cell phone!)

V91.07XA: burn due to water-skis on fire (that person must have been going superfast to be able to ignite wood!)

W5922XA: struck by turtle; sequel

Z63.1: Problems with in-laws; subsequent injury (note not the first encounter!)

W56.22X.A: Struck by orca, initial encounter

Z62891: Sibling rivalry

T505x6A: Under-dosing of appetite depressants, initial encounter

V616xxD: Passenger in heavy transport vehicle injured in collision with pedal cycle in traffic accident, subsequent encounter (shouldn’t this be the other way around!)

V9733xD: Sucked into jet engine, subsequent encounter (how did they survive the first one!)

T63442S: Toxic effect of venom of bees, intentional self-harm, sequela (heck of a way to try and off oneself!)

Z621: Parental overprotection (this one will be super popular here in the States!)

W53.21XA: Bitten by a squirrel (didn’t they read the sign: “Don’t feed the squirrels!”)

W56.49: Injury due to other contact with shark (got to watch out for that tail!)

Y93.D1: Activity, knitting and crocheting (I can just see the headline: “Grandma attacks with crochet needle!”)

W55.21: Bitten by a cow

W58.03: Crushed by an alligator (note, not bitten but crushed!)

As opposed to

W58.13: Crushed by a crocodile (see above!)

And finally

W18.12Xs: Fall from or off toilet with subsequent striking against object (why do I have a feeling alcohol was involved!)