Equities and the Economy

After a nice three day run stocks took a breather yesterday retreating from the psychologically important 18,000 level. The Dow closed down 114 points, 0.6%, at 17,983 and the S&P 500 lost 11, 0.5%, ending at 2,091. The Nasdaq performed really well considering what went on around it closing down just 2 points at 4,946. A pause seems appropriate for not only are we at the 18,000 level, we’re also close to record highs with the S&P within 1% of its high set last May. Also, oil prices fell yesterday which added to the weight of the bull’s yoke. It’s earnings season and the releases yesterday were mixed so bottom line, the market simply needs a pause.

Turning to the economic news, the Labor Department released its weekly initial jobless claims data, and folks, if claims are an indication of the U.S.’s economy, this country is doing very well. Claims last week fell 6,000 to 247,000 a multi-decade low, specifically November 1973. I was in high school! 2.14 million are receiving unemployment benefits, 7.6% less than a year ago. Impressive!

Overnight the Asian stocks closed mixed with no big movements either way. The major European markets are currently trading marginally in the red while here in the U.S. the bellwether indexes are chopping around on either side of unchanged.

Oil

As mentioned above, oil prices fell yesterday after two strong up days. WTI lost an even buck to $43.18 and Brent closed off $1.27 at $44.53. The dollar gained on the euro which also put some pressure on all commodities. That being said, crude prices are hovering near 5 month highs supported by the International Energy Agency’s forecast that this year non-OPEC oil production will fall at the largest rate in 25 years. Additionally, gasoline demand in China has been off the charts high the result of a growing middle class who can now afford to buy a car and travel. Assuming they don’t get caught up in those stunning traffic jams which last for days!

This morning WTI is taking back all the ground it lost yesterday trading up $1.00.

Natural Gas

Natural gas prices closed basically unchanged to Wednesday at $2.066, down 0.1¢. The EIA released its weekly storage report noting 7 Bcf was injected into U.S. storage fields last week. This was mildly bearish for the market was looking for a net injection of 1 Bcf. Storage levels remain at record highs. We currently have 2,484 Bcf in storage which is 60% greater than last year at this time and 48.5% above the 5 year average. That being said, the surplus has shrunk materially over the last couple of weeks.

This morning natty is up 1.1¢ consolidating just below 2.5 month highs. The weather is a moot point for even though temperatures are above normal for the next 10 days in a good portion of the eastern half of the country, we’re in April and those above normal temperatures aren’t generating any CDD’s.

Courtesy of MDA Information Systems LLC

Elsewhere

Odds are bananas will be getting more expensive in the near future. Not sure you are aware of this but there’s a disease spreading around the globe threatening Latin America’s banana growers, which is the primary source of bananas to North America and Europe. The industry is so worried about it that it moved this week’s International Banana Congress from Costa Ria to Miami at the last minute so attendees wouldn’t transport the disease to the region with contaminated dirt on their shoes. The disease is known as “Panama disease” or “Fusarium wilt” and has already spread from Asia to parts of Australia, Africa and the Middle East. It specifically affects the Cavendish banana which is the fruit we in the West typically eat. The disease stays in the soil for up to 40 years and billions of dollars and billions of tons are at risk. In the 19060’s, an earlier strain of the Panama disease wiped out what had been the most popular banana, the Gros Michel. Producers subsequently adopted the Cavendish banana, which was deemed an inferior product but more resistant to disease. Banana scientists (I can vision it. You’re at a social event and the always asked question comes up “What do you do?” I’m a banana scientist!) and growers are now considering which new banana might replace the current Cavendish variety.

For now banana prices in the U.S. have been spared but only because the disease has not hit Latin America. Yet. But you will begin seeing changes in varieties over the next decade as the disease spread.