Equites and the Economy

Good morning. Excellent, excellent, excellent day yesterday! The Dow rose a whopping 217 point, 1.28%, finishing at 17,142, the S&P 500 added a very material 30 points, 1.49%, closing above the big psychological 2000 figure at 2,024 and the Nasdaq rose a huge 87 points, a big 1.82%, at 4,870. Yesterday’s price action put U.S. stocks at 8 week highs. Booyah! The financial sector, which rose more than 2%, pulled the entire market higher with the bull stampede beginning after Citigroup announced its Q3 earnings (I told you its earnings season!) coming in better than analysts were expecting which pushed the stock up a very material 4% higher on the day. The Nasdaq rallied as buyers finally came in buying healthcare and biotech stocks which have been destroyed of late and have not participated in the recent equites’ rally. The S&P is still 1.7% lower on the year and the Dow is off 2.8% but that’s a big improvement from the end of August. Bottom line, we’re heading in the right direction.

What’s going on now folks is that old bad news, good news thing, i.e., investors are betting that with the weak data out of China and some weak data in the U.S., the September monthly jobs report released 10/2, the Fed will not raise interest rates this year. By the way, CNN’s Fear & Greed Index has recovered to 44, Fear, from single digit readings at the end of August.

Regarding economic data, good news came from the Labor Department in its weekly jobless claims report showing first time claims dropped 7,000 to 255,000, the lowest level in 42 years! Labor also reported it’s consumer price index for September with the most important statistic being that core inflation, which exclude volatile food and energy, rose 0.2% in September and 1.9% y-o-y. This is going to get real interesting. Two of the most important statistics the Fed looks at for interest rate policy is the unemployment rate and inflation. The former is 5.1%, which is well within the Fed’s target, and the latter is a smidgeon below the Fed’s target of 2%.

This morning the Asian markets closed higher but that is on the coattails of the U.S. markets so we can discount that somewhat. The major European indexes are trading nicely in the green between 0.23% and 0.44% up also on the big gains in U.S. stocks yesterday. It looks like investors and traders are coming into the office late with all three major bourses trading close to yesterday’s closes. Chatter.

Oil

For the last two days oil prices have been very, very quiet. On Wednesday WTI closed down 2¢ and yesterday it was off 26¢, to $46.38, both chatter. Brent lost 44¢ yesterday settling at $48.71. The DOI reported yesterday, a day late due to the holiday, that aggregate (crude, gasoline, and distillate) inventories rose a huge 3.424 million barrels last week compared to an expectation of a decrease of 500,000 barrels and a 5 year average of a decrease of 1.432 million barrels. Now this egregiously bearish number should have pushed WTI prices lower, but didn’t because the data was already pretty much built into the market with the day earlier API number very bearish.

This morning the sailboat remains in “irons” with WTI up 27¢. Traders must be talking sports.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural Gas prices were up about a nickel yesterday morning to a two week high with the bulls knowing the futures market is oversold and looking for stops, and then the EIA matador went to work. At 9:30 CDT the agency released its storage report showing the country injected an even 100 Bcf last week which was a material 10 Bcf greater than estimates. The proper price reaction resulted with natty immediately giving up all its gains, and more, closing down 6.5¢ at $2.453. Intraday prices fell to within a penny of this month’s 3 year low at $2.403. Current storage levels are now 447 Bcf above last year (15.5%0) and 168 Bcf, 8%, above the 5 year average.

With respect to the all-important weather forecast, the eastern third of the country will experience a pretty good cold snap for the next 5 days material boosting HDD’s but in the 6-15 day time frame the whole country gets a big warm up with significantly above normal temperatures coming to the eastern third resulting in some spectacular weather. Although the weather forecast is bearish traders are a little reluctant to push natty to a new low, with it being close to support, with prices down only 1.8¢ as I write.

Elsewhere

John Rowlands was a member of the Sixth Arkansas Infantry in the Civil War. He was just 26 years old in April of 1862 which could help explain his actions in the bloody battle of Shiloh. On the first day of battle Rowland and his fellow Confederate infantrymen stormed the last center of Federal resistance pushing the Yanks back. On the next day, however, the Northern army regrouped and attacked and Rowland was captured. As he was about to be herded back to a Yankee prison Private Rowlands had a change of heart. He indicated that he now realized he had been on the wrong side all along and wanted to switch sides and join the Union army! It wasn’t long, however, before marching under the Union blue got the best of Rowlands, so he reported himself ill and was dismissed on account of poor health. Now he was faced with a dilemma. He couldn’t remain in the army and he couldn’t go home, so he came up with another idea. He joined the Union navy. Rowlands served in the navy until the end of the war. However, when he wasn’t immediately discharged, he deserted.

All told, his was a pretty dismal service record. He had been a turncoat, a malingerer, and a deserter. However, in a strange twist of fate this failure of a soldier and sailor managed to accomplish an amazing task, and in a far off continent-Africa. You see, John Rowlands changed his name to Henry M. Stanley, and it was he who searched for and found Dr. David Livingston in 1871 uttering that famous line, “Dr. Livingston, I presume?”

Have a good weekend.