Equities and the Economy:

U.S. equities retreated yesterday with the Dow falling 46 points to 18,480, the S&P 500 off 5 to 2,181 and the Nasdaq snapped a four day winning streak which took it to new highs closed down 24 at 5,259. But let’s keep this all in perspective, stocks remain near their record highs and the S&P is up 7% for the year. For the last two months the Dow and S&P have been stuck in a range. Since July 12th the Dow has traded between 18,347 and 18,636 so as of yesterday’s close we’re less than 1% off the high. I’ll take that performance all day every day. The “excuse” in the market yesterday was that the ECB, who concluded their meeting yesterday, did not announce any additional QE, i.e. lower interest rates or increase asset purchases, disappointing the market. Personally, I just think investors are looking for an excuse to take some profits. As I’ve said too many times, investors know S&P valuations are at lofty levels historically and they’re skittish.

The only economic data point of any importance yesterday was the Labor Department’s weekly jobless claims report noting claims fell 4,000 last week to 259,000. The importance here is that claims have now been under 300,000 for 79 consecutive weeks which is a record.

Things are not starting off so well this morning. The Dow is down 194 points. Investors are pointing to Boston Fed President Eric Rosengren’s speech stating that low interest rates are increasing the chance of overheating the U.S. economy. The importance here is that Mr. Rosengren is both an FOMC voting member AND historically has been a monetary dove. Investors angst just increased regarding an interest rate hike this month and are taking some chips off the table. Let’s see how the day ends.

Oil

Oil prices skyrocketed yesterday with WTI popping $2.12, 4.7%, closing at $47.62 and Brent jumped $2.01, 4.2%, settling a penny below $50. Why? Because not only did the DOE’s weekly crude and products report yesterday validate the stunningly bullish API’s report from Tuesday, it was even more bullish. Whereas the API noted a decline of crude stocks for last week of 12.1 million barrels, the DOE reported a decline of a whopping 14.5 million. Additionally, the API showed a drop of 2.3 million barrels of gasoline and the DOE reported a drop of a huge 4.2 million. But here’s why the drawdowns were so large. If you recall, Tropical Storm Hermine was in the Gulf last week causing imports of crude to drop a whopping 760,000 barrels per day. Additionally, temporary shut-ins caused a drop in production of 150,000 bpd. And if that wasn’t enough, refinery runs (demand) were at their highest level since August 2015. We can expect a return to normal in next week’s report.

This morning it’s a risk off day everywhere with WTI prices down $1.13 which is no doubt caused by the fall in equity prices.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices apogeed (like the new word I just created!) yesterday rising a big 13.0¢ settling at $2.806. No doubt what the driver was, the weekly EIA storage report. Setting the stage, the market was looking for an injection of 45 Bcf. The actual number, 36 Bcf. Zing went prices at 9:30:15 CDT. Current storage levels are still above last year and the 5 year average with the former now +198 Bcf, 6%, and the latter + 306 Bcf, 8%. Those numbers have been decreasing all summer and it’s very possible we’ll go into this winter with less gas in storage than last winter, but only marginally so.

Unlike equities and oil natural gas is extremely quiet this morning being up a penny.

Elsewhere

The NFL season kicked off last night with Denver beating Carolina 21-20 in a great game. For 5 months the NFL will dominate Sundays, at least here in the U.S. It’s actually more popular than church. Let’s do a closer inspection of a typical NFL game. The average game lasts 3 hours and 12 minutes. However, per the WSJ the actual playing time is a mere 11 minutes. Its analysis showed the average broadcast spent more time on replays (17 minutes) than on live play. The plurality of the time (75 minutes) was spent watching players, coaches and referees essentially loiter on the field. And then of course there are the advertisements. The average game has 20 commercial breaks containing 100 ads adding up to an hour, almost one third of the game. By the way, I did some quick math on what JJ Watt gets paid. Based solely on actual play time his salary is about $190,000, a minute. And worth every penny!