Equities and the Economy

U.S. equities limped lower yesterday with the Dow losing 163 points, 0.92%, to 17,568 and the S&P 500 dropping 13, 0.65%, to 2,064. The Nasdaq performed relatively well waffling around unchanged all day closing down a meaningless 4 points at 5,098. The Nasdaq hung in there because the biotechnology sector, which got destroyed in Q3, rallied yesterday 1.7% higher. At one point in the morning the Dow was down 200 points but oil prices began recovering in late morning which pulled up the indexes. All three major indexes have closed lower in four of the last five sessions. Although oil prices hung in there, WTI down 14¢, the oil sector continued to get whacked. Exxon Mobil was the largest decliner in the Dow. Oil prices below $40 is really getting the attention of investors. Additionally, and as I wrote about in yesterday’s blog, a report out of China yesterday showed weaker Chinese export and import data. Over the last two session the Dow has fallen 279 points and the S&P has lost 28.

Regarding fundamental data, the NFIB Small Business Optimism Index for November was 94.8 coming in below expectations of 96.0. Drilling down the report showed mixed data with future sales falling however job openings, investment plans and hiring plans rose. The Job Openings and Labor Turnover report was also released and was a bit of a disappointment. Job openings, which have been extremely strong recently, fell to 5.383 million in October, the latest month for this data, from 5.534 in September. The implications of this is that maybe there will be less upward wage pressure.

Overnight Hong Kong’s Hang Seng and Japan’s Nikkei got hit pretty good but China’s Shanghai hung in there closing flat to Tuesday. The major European indexes are currently trading flat to lower with London’s FTSE flat while the German and French major bourses are somewhat lower. They’re not getting hammered, but are down. Here in the states we’re getting a little bit of a bounce with the Dow up 46.

On a technical note, and as I mentioned yesterday, the S&P is right on both short and long term support. The former dating back to October and we’ll call that minor support. The latter dating back to Q4 2011. I guarantee you the “professional money” is knows this and may be at least one reason why U.S. equities are hanging in there this morning. The trading rule is to buy support and sell resistance. We’ve been in a bull market since late 2011 where “buying the dip” has made you money. Let’s hope this is another buying opportunity. The next few or 5 trading sessions will be interesting.

Oil

As I mentioned, oil prices pretty much hung in there yesterday. WTI slipped 14¢ closing at $37.51 while Brent lost 47¢ closing at $40.26. Brent hit its lowest level of the year yesterday trading below $40. Saudi Arabia is backing up its rhetoric with action. I’m talking about capturing market share. A report was released yesterday showing that its exports to Asia for the first 11 months of this year are up 12% vs. the same time last year.

After hitting new 6 year lows yesterday oil prices are rebounding this morning with WTI up 57¢ on the API data released after the bell yesterday stating crude inventories fell 1.9 million barrels last week, which was unexpected for analysts were expecting an 800,000 rise. I’m sure this is supporting equities today.

Despite the low current prices, Bloomberg is reporting analysts are still predicting $50 Brent next year.

Courtesy of MDA Information Systems LLC

Natural Gas

After getting whacked 11.9¢ on Monday, the bears gave the bulls the day off to lick their wounds and natural gas prices did nothing yesterday with the January Nymex contract closing up a meaningless 0.3¢ at $2.070. Intraday the market tested the $2 level trading as low as $2.015 first thing in the morning. The theme remains the same with a warm weather forecast coming in every day. Eastern Canada is downright balmy! No doubt the strongest El Nino on record is playing out! Natty prices have to go low enough to displace coal in the electric generation market. And they are for natural gas burns in the electric generation are both at record highs for 2015 and for this time of the year.

This morning natty is up 2.7 cents.

Elsewhere

Is your belt size going in the opposite direction of your bank account? These seemingly unrelated phenomena may be more correlated they you realize. According to the Principal Financial Group’s annual Financial Well Being index, dining out is the number one thing that blows up the average American’s budget. And to make matters worse, those restaurant meals are adding to our waistlines. On days when people dine out they tend to consume 200 more calories than when eating at home per the publication Public Health Nutrition. Also, government research shows that “when dining out, people either eat more or eat higher calorie foods, or both, and this tendency appears to be increasing.” The problem seems to be getting worse. In 2014 22% of Americans blew their budget on dining. That increased to 24% in 2015.

The reason lies, in part, in our hectic lifestyles as the demand on our time keeps increasing. We’ll dine out instead of cooking at home because not only is it convenient, but it gives us a small pleasure. Savings expert Andre Woroch recommends buying discounted gift cards for restaurants (Costco) . She adds that you can find savings at Yelp as well. “Not only is Yelp a good place to find honest restaurant reviews and menu recommendations, but you can also search for ‘dining deals’ as well as ‘cheap dinner’ and sometimes stumble on special discounts.” Also, adjust your schedule to take advantage of happy hours and if you have kids, look for those kids eat free nights.

With respect to the theme of belt and budget, all I can say is “Guilty as charged!”

Have a good day.