Equities and the Economy:

Yesterday was a completely lackluster day. The Dow fell, the S&P 500 closed flat to Tuesday and the Nasdaq rose with the latter setting a new record high. The numbers are: Dow down 12 to 18,526, the S&P at 2,186 and the Nasdaq up 8 to 5,284 getting a boost from Apple which rose 0.6% after the company unveiled its new iPhone 7. Moving on to the economic reports yesterday, the Fed released its beige book which it always does prior to the FOMC meeting which is next week. The book is published eight times a year and is a report of anecdotal information on current economic conditions in each of the12 Fed districts. The book was vanilla, even boring, noting consumer spending was little changed, manufacturing activity rose slightly, wage pressure was fairly modest and expected to remain modest in the coming months, and price increases remained slight. My interpretation is this takes any chance of an interest rate hike off the table with this dovish Fed meeting next week. The other significant data yesterday was the Labor Department’s job posting report noting employers posted 5.87 million jobs in June which is a material increase of 4% from May, and a record high. The report also noted employers added 5.23 million employees in June, up from 5.17 million in May. You’ll note the material gap between posting and hires. That ties in with employers biggest complaint which is workers lacking the skills the employers want for the open positions.

This morning there’s one event and one report is the news. Regarding the event, which preceded the report, the ECB concluded its monetary meeting (analogous to our FOMC meeting) and as widely expected the bank left interest rates unchanged, including the rate it pays on deposits which is minus 0.4%. Yes, member banks have to pay to park their money at the ECB (Japan is doing this as well.) It’s lending rate remained at +0.4%. It also is continuing its QE of 80 billion euro per month of asset purchases. (the Fed ceased similar purchases well over a year ago). It’s really interesting what’s going on there because the ECB is running out of sovereign debt to purchase and is considering expanding the program to corporate debt (individual company’s bonds. Wouldn’t you just love that if you were a CEO of a large publically traded European company?!)

The report was the Labor Department weekly initial jobless claims report noting claims fell 4,000 to 259,000. The significance? This is the lowest weekly claims level in 7 weeks. With the aforementioned job postings at a record high and jobless claims low the labor market is on very sound footing.

Oil

Oil prices settled marginally higher in a choppy day of trading. WTI added 67¢ closing at $45.50 and Brent rose 72¢ settling at $47.98. But let’s just move on to today for the big news was the shockingly bullish API (American Petroleum Institute) crude and products report released yesterday after the bell. Going into the report analysts were forecasting for crude inventories to rise 500,000 barrels. The actual number was a whopping 12.1 million barrel decline. If that wasn’t bullish enough, gasoline inventories dropped 2.3 million barrels which was way more than estimates of a 250,000 decline. That data has brought the bulls out this morning with the beasts looking to extend their rally into a 4th day with WTI up 61¢. Also helping oil is the dollar is slipping vs. major foreign currencies. Let’s see if the DOE’s weekly report coming out today confirms the API data. As I’ve mentioned before, the API data, while informative, must be taken with a small grain of salt because reporting to the API is voluntary. Reporting to the DOE is mandatory.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices eased 4.1¢ yesterday closing at $2.676 and actually trading at a two week low of $2.665 with the market extending its slide into a 4th consecutive session. The bulls have been feeling the pressure from the cash market which has been leaking weaker despite the warm weather in the east over the next couple of weeks. Today’s forecast is little changed from yesterday, but the market is up 6.6¢ on what I believe is short covering before this morning’s EIA weekly storage report. The market is looking for an injection of 45 Bcf. Storage report day is always so much fun!

Elsewhere

As mentioned above, Apple unveiled its iPhone 7 and 7 Plus yesterday. (I’m sure you just couldn’t wait for this!) Saving you the research, here’s the differences between the 7 and the iPhone you have. The 7’s antennae is much more discreet than the 6’s (I’m sure this was really bothering you!) The 7’s 64 bit quad core chipset is 40% faster and will us only 20% of the power the 6’s require extending battery life. Apple claims this new chip is the most powerful chip that has ever been in a smartphone (I wonder if Samsung agrees?!) The new display is 25% brighter than last year’s iPhone. The storage of the new phone is more than double with the base phone having 32GB, the mid-tier phone having 128GB and the top tier 256GB. The battery of the 7 is supposed to last 2 more hours compared to the 6 assuming average daily use. The 7 camera is completely revamped with optical image stabilization, 6 element lens, a 60% faster and 30% more energy efficient 12 megapixel sensor, new image signal processor with twice the throughput of the 6 and a 7 megapixel facing camera. Apple will keep the silver, gold and rose colors but the space gray is gone. However, there will be a new black color and a high gloss jet black. And here’s what we’ve all been waiting for, the 7 will be water resistant. Note I didn’t say water proof. Technically, it’s capable of working down to 1 meter (3.3 feet) for up to 30 minutes. And finally, and the most talked about change, the 7 has no headphone jack. It’s Bluetooth. However, there will be a Lightening to min-jack adapter included in the box. The Bluetooth headphones included are small and have no cord. A perfect design for you to lose one!