Equities and the economy

For a second consecutive session U.S. equities price movement was muted with the Dow closing up 13 points at 17,990, the S&P 500 finishing 4 points higher at 2,091 while the Nasdaq posted a loss of 8 points ending at 4,888. Chatter. Investors are pausing right now being that we’re up at technical resistance (close to all-time highs), weaker fundamental data, weak earnings (although expectations were extremely low going into earnings season) and the FOMC meeting (their two day meeting ends today). Regarding the latter, no one is expecting any changes especially since there is no post meeting press conference, although there will be the normal post meeting communique. On the glass is half full side (the side I’m always on) it’s encouraging that the S&P is holding near record highs after realizing a 15% rally from the low in February. Speaking of central banks, as I mentioned in yesterday’s Blog, the Bank of Japan’s meeting is garnering a lot more attention globally than the FOMC’s meeting and it will conclude it’s two day meeting tomorrow.

Turning to the economic news of the day, the Commerce Department reported yesterday that Durable Goods orders rose 0.8% in March which was a bit less than expectations. Monthly Durable Goods data can be volatile though with an aircraft sale pushed from one month to another. However, there is a piece of data in the report that is closely monitored and that is “orders for nondefense capital goods excluding aircraft” which came in unchanged and well below the Street’s expectations of a rise of 0.8%. Also disappointing was the Conference Board’s report that its index of consumer confidence for April was 94.2 with economists expecting a number closer to 96.0.

S&P/Case-Shiller released its 20 city home price index noting that home prices rose 5.4% in February y-o-y which was a bit less than January’s 5.7% increase but at analysts’ expectations. Finally, the financial services firm Markit Economics reported its index of service sector business activity rose from 51.3 in March to 52.1 in April which was also at expectations and importantly greater than the “50” level indicating growth.

This morning the Asian markets set a negative tone closing in the red which is where the European markets began trading but the latter have recovered and are currently trading marginally in the green. Here in the U.S. Dow futures are down 44 points but Nasdaq futures are getting hit pretty hard being down 47 points, 1.05%, on a very disappointing earnings report from the behemoth Apple which posted its first y-o-y revenue drop in 13 years.

Oil

Oil prices rallied yesterday with WTI jumping $1.40, 3.3%, closing at $44.04 and Brent settling up $1.26, 2.85%, at $45.74. Commodities in general got a boost from a drop in the value of the U.S. dollar which fell 0.5% vs. a basket of currencies, its sharpest drop in a week. In addition to the weaker dollar oil found some support from Bob Dudley’s (BP CEO) comment yesterday that they believe the oil market will balance by the end of this year.

This morning WTI is up 87¢ on API’s reported last evening that U.S. crude stockpiles fell 1.1 million barrels last week which was a surprise to the market which was expecting a build of 1.3 million barrels. Also supporting prices is a report this morning from the World Bank projecting that demand from U.S. refineries will increase and that U.S. production declines will steepen in the second half of 2016. Overnight WTI traded over $45 which is the first time its breached that level since last November but has since backed off and currently trading marginally below that level.

Natural Gas

Natural gas fell 3.1¢ on the May Nymex natural gas contract penultimate settling at $2.032. Today the May contract expires and is down 3.1¢ straddling the $2.00 level. This is down about 17¢ from its near 3 month high hit earlier this week of $2.176. Of note though, the back of the curve remains well bid with strong buying interest in the calendar 2018 strip and beyond. Yesterday the cal ’18, ‘19 and ’20 strips closed up at 3¢.

This week’s weather forecasts have brought the bears out of their caves showing normal to below normal temperatures in the 6-15 day time frame for the southern U.S. reducing A/C load.

Courtesy of MDA Information Systems LLC

Elsewhere

This year the world is celebrating the 400th year since William Shakespeare died in his hometown of Stratford-upon-Avon, England. The beloved playwright wrote at least 37 plays during his lifetime, including Hamlet, Othello, A Midsummer Night’s Dream and Romeo and Juliet. His work was so profound we use many of the English lexicons he created today. Examples:

Good Riddance – meaning to happily get rid of anything worthless. This phrase originated in Shakespeare’s 1609 play “Troilus and Cressida.” The idiom was so durable it even became the name of a popular Green Day song in 1997.

Break the Ice – Shakespeare wrote this group if words in his 1590 play “The Taming of the Shrew.” It means to overcome a socially awkward situation.

Wild Goose Chase – First seen in 1597’s “Romeo and Juliet,” a person who goes on a “wild goose chase” is searching for something that’s not likely attainable.

Love is Blind – Shakespeare created this phrase, often as a warning, for his play “the Merchant of Venice,” first performed in 1605. It means that sometime’ s ones feelings for their loved ones can obscure reality.

Brave New World – This expression from Shakespeare’s play “The Tempest,” believed to have been written between 1610 and 1611, refers to a prominent moment in social history.

Naked Truth – Shakespeare wrote this phrase in his play “Love’s Labor Lost.” Written in the 1590’s. It means what you think: the complete and utter truth.

Green Eyed Monster – Seen for the first time in 1603’s “Othello,” this idiom was Shakespeare’s way of how jealous looks.

Bated Breath – This is another phrase from “The Merchant of Venice,” which means to be so excited, anxious or nervous that you’re actually holding your breath.

[Fight] Fire With Fire – Shakespeare wrote this phrase in his 1623 play “King John.” It means to use the same tactics as an opponent to beat them, even if you have to play dirty.

Laughing Stock – These two words appear in Shakespeare’s play “The Merry Wives of Windsor,” published in 2602. It describes a person or thing that is greatly ridiculed.

And then there’s the one I’ve used a few times in my Blog, “There’s the Rub” – The phrase comes from Shakespeare’s famous “To be, or not to be” soliloquy in “Hamlet.” It’s a term for an abstract impediment or hindrance. In the play, Shakespeare was referring to Hamlet’s reluctance to commit suicide.