Equities and the Economy:

Friday capped a very volatile week for U.S. stocks with the Dow closing down 89 points, 0.49%, at 17,124, the S&P 500 fell 8 points, 0.38%, ending at 2,139 and the Nasdaq finished off 5, 0.10%, at 5,245. Now for the good news. The S&P 500 squeezed out a weekly gain of 0.5%. The economic news on Friday was mixed with the Labor Department reporting that Consumer Prices in broad terms rose 0.2% m-o-m in August compared to July’s 0.1% rise and the Street’s expectation of 0.1%. Ex-food and energy, i.e. core inflation, prices rose 0.3% compared to 0.1% previously and expectations of a 0.2% rise. Health care costs and rents rose but were offset by a drop in gasoline prices. I’m sure Janet Yellen will take note of this data but that being said, this is not her favorite inflation gauge. This will be the last inflation data point prior to the next FOMC meeting which is tomorrow and Wednesday. Don’t expect any changes in interest rates. The market is pricing in only a 15% chance of an increase.

The University of Michigan’s Consumer Sentiment Index for September also came out Friday at 90.3 which was so very marginally lower than the expectation of 90.8 not influencing the market.

Commodities in general are higher this morning (grains, both precious and base metals, sugar) including oil which is bringing in buyers of equities and the Dow is up a very nice 113 points.

Here’s a statistic I found very interesting, per Deutsche Bank, since the Lehman Brothers collapse eight years ago central banks around the globe have slashed interest rates an estimated 672 times. Like I’ve said previously, it’s a race to zero as each bank tries to outdo the other one to make their currency cheaper to make exports more attractive and boost their local economy.

As I’m sure you are aware, there was a bombing in the popular Chelsea district in lower Manhattan on Saturdays evening injuring 28 people but fortunately no one was killed. Officials also found an unexploded pressure-cooker device (think Boston) on 27th street. This morning another bomb exploded in Elizabeth, New Jersey near a train station. Authorities found an additional four “suspicious” devices. It appears markets have become numb to these type of terrorist attacks.

Oil

Oil prices closed lower on Friday capping a bad week for the oil bulls. WTI closed down 88¢ at $43.03 and Brent settled 82¢ lower at $45.77. Oil prices fell 4.7% for the week and are down 16% from their early June highs. The theme of late has been increasing production from counties such as Iran, Iraq, Nigeria and Libya with no one believing there’ll be a production freeze by Saudi Arabia and Russia with the latter two pretty much at record levels of production. Additionally, last week both the IEA and OPEC cut their forecast demand growth for both this year and next. Saudi Arabia and Russia will meet “on the side” at next week’s OPEC meeting in Algiers. It looks like “Lower for Longer” is now “Lower to Even Longer.”

This morning oil prices are getting a little boost, 62¢, as fighting has once again erupted over the weekend in Libya delaying what was to be the first exports from the Ras Lanuf terminal since 2014.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices eked out a small gain on Friday closing up 2.1¢ at $2.948 with late summer hot weather elevating cooling demand. For the week natty prices consolidated just below their 2016 highs of close to $3.00. The cash market is definitely supporting the futures market. Last Wednesday for the first time in 482 days cash prices at Henry Hub, LA, the Nymex contract delivery point, reached $3.06/MMBtu, the highest level since May 20, 2015 when we hit $3.07. Regarding storage, although injections will continue to be below normal, storage injections should pick up somewhat as we continue to work into fall with average temperatures falling. With respect to the weather forecast, the big ridge that has been sitting over the eastern U.S. for the last week continues with temps across the Midwest and east 8 to 15 degrees above normal. That’ll definitely increase natural gas burns. This morning natty is down 2.8¢.

Elsewhere

I purposely avoid discussing politics in my Blog unless it relates to energy. However, I just couldn’t pass up not mentioning the following. Last Thursday Donald Trump spoke before the Economics Club of New York. In his speech he stated that recently Ford announced it is moving all its small car production to Mexico. He added that back in 1970 there were more than 80,000 people in Flint, Michigan working for GM and today that number is less than 8,000. He then went on to say, “It used to be cars were made in Flint and you couldn’t drink the water in Mexico. Now the cars are made in Mexico and you can’t drink the water in Flint.” That is “the” line of campaign so far.