Equites and the Economy

Good morning. Although U.S equities closed lower yesterday they held on to most of Wednesday gains including the Dow’s 198 point rise that day. The Dow fell 24 points to 17,756, the S&P 500 lost a single digit to 2,089 and the Nasdaq fell 22 to 5,074. 3rd quarter GDP data was released yesterday and it was somewhat disappointing coming in at a tepid 1.5% and at the low end of expectations. Drilling down into the data, a positive was that personal consumption spending grew at a robust pace rising 3.2% indicating the consumer is feeling more confident is his or her economic condition. Closer to your personal balance sheet, the National Association of Realtors reported yesterday that its pending homes sales index fell 2.3% to 106.8 in September vs. August. This was quite a good deal worse that Wall Street was forecasting. The median sales price for a previously occupied home rose to $221,900, up 6.1% from a year ago helping the net worth of the nation’s homeowners. The report reinforces the current theme that weakness in sales is more due to high prices than economic pressures.

This morning Dow futures are up 26 points showing some resiliency being that the major European bourses are all trading red, albeit marginally.

By the way, CNN’s Fear Index is now at 71 (out of 100) and dramatically higher than the single digits seen at the end of August when equities were down as much as 20%.

Oil

Oil prices didn’t do anything yesterday with WTI up 12¢ closing at $46.05 and Brent falling 25¢ to $48.80 which was the day after a the massive short covering move seen Wednesday when WTI rose $2.74, 6%, its biggest rally in 2 months. Oil prices have been pretty range bound of late. Since late August WTI has been trading between $42.75 and $50.92 with most activity in the $44.00 to $49.00 range. This morning WTI is very quiet down 14¢ and looking to post its first weekly gain in 3 weeks.

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA released it weekly storage report yesterday noting that 63 Bcf was injected into U.S. storage fields last week. This was 5 Bcf less than traders were expecting and futures prices immediately shot up as much as 12¢. But as has been the case recently, Mother Nature with her warm forecast is trumping the EIA storage report and the bears took over pushing prices lower and at day’s end the December contract closed 4.1¢ down at $2.257. December gas $2.25! Incredible! And this morning the bears continue to sell with natty being down 3¢.

Cheap oil. Cheap natty. Not a good time to be an oil and gas producer.

Elsewhere

It was May 10th, 1869 in a despot spot called Ogden, Utah. All the nation’s attention was focused on that location for that is where the two giant railroads, the Central Pacific Railroad and the Union Pacific Railroad, were to meet creating the first transcontinental railroad. It was a grand day indeed. A huge celebration was prepared with executives of both railroads present along with large crowds and government officials. It was carnival atmosphere. Marking the event Leland Stanford, the president of the Central Pacific, was to drive the final two spikes, which were made of gold, with a silver hammer. With the crowds pressing and Stanford about to drive the spikes, a mysterious man posing as a San Francisco jeweler mingled amongst the onlookers. He was taking orders to make souvenir watch chains from the golden spikes and collecting $5 for each chain. It was then announced that the golden spikes were going to removed right after the ceremony. Subsequently, the “jeweler” was nowhere to be found. Those who succumbed to the fanciful oratory of the con-man were livid, and wanted compensation. After the two golden spikes were removed by the authorities for safe keeping and under the cover of darkness, the angry victims proceeded to confiscate twelve regular spikes, six ties and two pair of rails! In their rage they had disconnected the railroad link almost as soon as it was completed! The damage was repaired an no one was ever caught, including the “jeweler.”

Have a good weekend