Equities and the economy

(Today’s Blog will be briefer than normal because I had an early morning meeting) Outstanding! That describes yesterday’s performance for U.S. stocks. The Dow raced higher by 187 points, 1.06%, ending at 17,908, the S&P 500 rose 21, 1.0%, to 2,082 and the Nasdaq added 75, 1.6%, finishing at 4,947. The S&P closed at its highest level since December 4th, the Dow touched more than a 5 month high and the Nasdaq registered its highest close of the year. It was JPMorgan which carried the banner for us posting Q1 earnings which beat market expectations. Morgan’s share price surged 4.2% on the news. Total market volume was above average which is positive. Volume tends to confirm market moves. A big up day on light volume can be a market head fake. As I mentioned in yesterday’s blog, it was a good start from the beginning of the day with China reporting exports for March rising 11.5%, way greater than expectations, and coming after months of decreases suggesting to investors that global economic growth may not be as weak as feared.

This morning it’s bivouac time. We had a couple days of substantial moves and the troops need to recharge and supply lines need to be reestablished. The Dow is up 20.

Oil

Oil prices halted a three day rally yesterday with WTI closing down 41¢ at $41.76 while Brent lost 51¢ settling at $44.18. There were a few events pressuring prices. First, OPEC cut its global demand forecast for 2016 citing concerns about demand from Latin America and China. In addition, the rumors continue to fly regarding OPEC’s and Russia’s freezing production at January’s levels. Yesterday the Russian energy minister indicated Sunday’s producer meeting may only be a loose agreement with little commitments. Finally, the dollar, which hit 18 month lows against certain currencies, rebounded sharply with the greenback posting its largest single session gain since late February and one of the largest for the year so far. Quite frankly, the fact WTI lost only 41¢ should be viewed as impressive.

This morning the correlation between equities and oil is holding with WTI up 26¢. Chatter.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices posted small gains yesterday with the May contract settling up 3.2¢ at $2.036. The focus has been on production which has fallen ~3 Bcf over the last couple of months. I expect more decline. You can’t cut the rig count to record low numbers and not see production decline. This cycle has taken more time than normal but it’s happening. There’s a saying in the oil patch regarding buckling down when low oil prices hit. “This ain’t my first rodeo partner.”

Today the EIA storage report came out showing a 3 Bcf withdrawal for last week. The market was looking for a 1 Bcf injection. So the actual number was mildly bullish Emphasis on “mildly.” More on the storage report manana. Natty is down 4.0¢ as I write. Resistance is $2.05 so every time we get near there sellers come in. My bet is the May contract expires over that. .

Elsewhere

Most Texans were asleep when this record was broken. At 1 AM on March 23rd wind power provided nearly 50% of Texas’ electricity requirements. It was the largest portion provided by wind in the electric grid’s history. Texas leads the nation in wind power production, which obviously is cheap to produce. For the entire month of March wind produced more electricity than coal for the first time ever for an entire month. Wind contributed 21.4% of the grid’s overall power compared with 12.9% from coal. More than 20% of ERCOT’s electricity capacity of 80,000 MW’s comes from wind, with more on the way. About 5,000 MW’s is expected to come on line in 2016. One MW is typically enough to power 200 homes during peak demand. While good news for environmentalists, it’s causing endless hours of anxiety for power generators that rely on natural gas, coal or nuclear energy. It’s estimated that more than 25% of the state’s power plants are operating at a cash loss. Something’s got to give. Expect announcements of coal plants closing.