Equities and the Economy

Last Friday was, unfortunately, just a bad a day as last Thursday. The Dow closed down an ugly and material 2.10%, 367 points, at 17,129, the S&P 500 lost 36 points, 1.76%, to 2,006 and the Nasdaq fell an even 80 points, 1.59%, ending at 4,923. Friday was the Dow’s worst day since September 1st and the result was it wiped out gains for the week. Disconcertingly, Friday’s volume was the second highest of the year, only surpassed by the flash drop in stock prices on August 24th . Last Friday was also a quadruple “witching” day meaning it was the expiration of three related classes of options and futures contracts along with individual stock futures options. A quadruple witching day occurs on the 3rd Friday of every March, June, September and December. For the week, the Dow was down 0.79%, S&P ended down 0.34% and the Nasdaq was off 0.21%.

Turning to the fundamental data, on Friday Markit Economics reported its flash service sector purchasing managers’ index fell to 54 in December from 56 the prior month. This is the lowest the index has been in 12 months. However, and this is important, it is still above 50 which separates expansion from contractions. The Labor Department reported Friday that unemployment rates fell in 27 states in November, was unchanged in 12 states and rose in 11 states. 35 states reported a net increase in employed people while 14 stated reported fewer jobs. This can only be viewed as positive.

Let’s move on to this morning for things are beginning much, much better than they ended Friday with Santa Clause working very, very hard on a rally for Dow futures are up a very nice 116 points primarily on the coattails of the European markets which are trading nicely green. Hold on to your sleigh this week for I would not be surprised if it wasn’t extra volatile (as if it hasn’t been volatile enough lately!) because liquidity is likely to be limited over the next two weeks due to the holidays.

Oil

Oil prices remain at the forefront of investors’ minds as Brent prices have fallen to levels last seen in 2004 and below the lows seen in 2008 during the financial crisis. WTI prices are at fresh 7 year lows. On Friday both oils closed marginally lower: WTI down 22¢ settling at $34.73 and Brent off 18¢ closing at $36.88. Baker Hughes surprised the market on Friday. More accurately, its rig count report did. The report stated that the number of rigs looking for oil in the U.S. actually increased by 17 with the market looking for a decline (obviously, at these low oil prices.) Now I will add that a weekly rise in rig count is the anomaly for other than last week and the small increase of 2 rigs 5 weeks ago, there trend has been down for the last four months and down materially for the past 14 months. Last year at this time there were 1,536 oil rigs operating. Last week, 541. You can do the math.

Today the January Nymex WTI contract expires and it is beginning its expiration day down a quarter.

Courtesy of MDA Information Systems LLC

Natural Gas

What can one say other than Mother Nature is being extremely cruel to natural gas prices. And very kind to the folks living in the upper Midwest, MidAtlantic and Northeast regions of the country. On Friday the January contract rose 1.2¢ closing at $1.767. Total chatter. Prices are currently at levels not seen since Prince’s song, 1999. Today Cincinnati will be 19.5 degrees above normal and on Wednesday 28 degrees above normal hitting a high of 65. On Christmas eve Philadelphia will be 34.5 degrees above normal! Saying that is material is a gross understatement. This morning natty is up 6.1¢ with some profit taking on a forecast in the 11-15 day time frame showing temperatures in the eastern 1/3rd of the country “only” 5-8 degrees above normal. Cash prices this morning are stronger than Friday’s as well, which is not surprising being “weekend gas” is almost always cheaper than “weekday gas.”

Elsewhere

Are you looking for a holiday present to give that I guarantee you no one has? How about socks? “What!” you say? “Everybody has socks!” Ah, I’m not talking just any socks. I’m talking about Netflix Socks! Not only do they warm you, Netflix’s socks pause your movie or TV episode if you fall asleep. The streaming giant unveiled a do-it-yourself project called Netflix Socks that have built-in sensors that detect when you doze off making sure you don’t sleep through the rest your stream.

According to Netflix, the socks’ sensor use a technology called actigraphy. An accelerometer detects when you’ve stopped moving for a prolonged period of time and triggers a signal to your TV that pauses Netflix. When it detects that you’ve dozed off, an LED light in the cuff of the sock flashes red warning that the pause signal is about to be sent to your TV. Any motion will stop it from firing.

There is a catch. You have to be pretty darn crafty because you have to build the device. The website says “ To build the sensor, you’ll need an understanding of electronics and microcontroller programming, and be comfortable around a soldering iron.” Want extra credit? Add a pulse sensor that detects a change in heart rate.

You’ve got to Google this and see the demo.

Have a good day.