Equities and the Economy

Good morning. U.S. stocks booked a fourth consecutive week of gains last Friday with the Dow popping 158 points, 0.9%, to 17,647, the S&P 500 adding 22, 1.10%, to 2,075 and the Nasdaq going apogee skyrocketing 2.28%, 112 points, to 5,032. There were two major events during the week supporting global equities. First, on Thursday the ECB, led by President Mario Draghi, announced that not only would they continue their bond buying program, but they were looking at additional means to stimulate the European economy. Second, and not to be out down, on Friday the Peoples Bank of China (PBOC) announced an interest rate cut as well as lowering reserve requirements (the amount of capital that must be kept on hand which is a function of loans outstanding). More QE folks! It’s like a race to zero! Who can depreciate their currency the most to stimulate exports!

The Nasdaq shot up on Friday fueled by a rally in technology stocks on great Q3 earnings reports from heavyweight tech companies Alphabet (Google), Microsoft Corp. and Amazon.com. The former two closed at all-time highs.

This morning stocks around the world are taking a breather after the strong Thursday and Friday last week, which is not to be unexpected. Like a big army on the move, bivouacking is periodically necessary to rest the troops and reestablish supply lines. The Asian markets closed mixed and European markets are doing the same. U.S. stocks are trading on either side of unchanged. Chatter globally.

The FOMC will be meeting Wednesday and the market will be looking for direction. The bet is there will not be an interest rate hike.

Oil

A natural conclusion would be that with the PBOC announcing additional economic stimulus measures and with China being the world’s largest importer, oil prices would rise, but they didn’t. Brent hung in there settling down 9¢ at $47.99 but WTI lost 78¢ closing at $44.60, both near one month lows. WTI prices fell despite Baker Hughes’ rig count report on Friday noting one less oil rig working although one additional natural gas rig was put in service. What is notable, however, is the U.S. rig count is now the lowest since July 2010. Although, per the EIA, U.S. oil supply is trickling lower, it has remained quite resilient in the face of the reduction on rig count. In addition, the U.S. dollar rallied sharply last week against foreign currencies putting price pressure on commodities priced in the greenback, which oil is.

On a longer term perspective, the El Nino with the expected mild winter forecasted for both Europe and the U.S. is not going to help the oil bulls.

This morning WTI is feeling some pressure being down 54¢.

Courtesy of MDA Information Systems LLC

Natural Gas

The bulls threw in the towel on Friday after natural gas broke technical support of $2.403, which was the previous 3 month low, with the bears piling on and natural gas closed down an even 10¢ lower at $2.286, a fresh 3 year low. Natty prices have now fallen more than 30¢, 13%, in less than a week. Adequate storage quantities going into winter with the prospects of a strong El Nino are bringing in the sellers.

This morning natty prices down 11.1¢ feeling the weight of the weather forecast which is decidedly bearish with materially above normal temperatures forecasted for the eastern half of the country in the 6-15 day time frame.

It’s starting very soon. I’m talking about the U.S. being an exporter of liquefied natural gas. Cheniere Energy announced that in January it would begin shipments of LNG from its Sabine Pass terminal located in LA. After January there will be another three trains coming to the market roughly every 6 months in the next couple of years. That’s going to suck up a lot of gas!

Elsewhere

A tremendous amount of literature has been written about the assassination of Abraham Lincoln and I’m very sure you are well familiar with the circumstances surrounding the tragedy. However, are you familiar with the strange events surrounding the less well known people associated with the event? For example, Henry and Clara Rathbone. They were the young couple who attended Ford’s Theatre with the Lincolns. They later moved to Germany where Henry lost his mind, killed his wife and ended up in an insane asylum. Then there was Boston Corbett, the soldier who shot John Wilkes Booth. He went berserk during an 1887 meeting of the Kansas State legislature, was arrested and sent to the Topeka Asylum for the Insane. How about William A. Petersen? He was the German tailor in whose house the president died. He committed suicide in 1871.

Ann Surrat, who tried to see President Andrew Johnson to plead for clemency for her mother who was about to be executed for conspiring to kill the president, was prevented from doing so by two men: ex-Senator Preston King and Senator James H. Lane. On November 13, 1865, King tied a bag of bullets around his neck and committed suicide by jumping off a ferryboat on the Hudson River. The next year, on July 11th, Lane shot himself to death in Fort Leavenworth, Kansas.

Doctor Anson G. Henry, the white house doctor who for weeks following the assassination comforted Mary Todd Lincoln, drowned on July 30, 1865 when the steamer he was on sank off the coast of California. As for Mary Todd Lincoln herself, a jury found her “…a fit person to be in a state hospital for the insane.” That’s where she wound up in 1875.

Nearly everyone who was even remotely connected with the assassination of Lincoln suffered some devastating personal tragedy.