Equities and the Economy:

• U.S. stocks posted a second day of gains.
• Dow 20,000 mark yet to be broken.

U.S. equities posted and are batting 1.000% for 2017! The Dow posted a 60 point gain, 0.3%, closing at 19,942, just 58 points shy of 20,000. The S&P 500 settled up 13 points, 0.6%, at 2,271 and the Nasdaq popped 48, 0.9%, to 5.477. The big winner was the Russell 2000 which rose 1.6%. If you recall, I wrote on Tuesday the Russell 2000 was the best performing index for 2016 posting a whopping 19.4% gain.

The most significant news yesterday was the release of the FOMC’s minutes of its December meeting. Investors are looking for clues on the Fed’s interest rate policy, i.e. are more interest rate increases coming in 2017. The minutes revealed the Fed may raise interest rates at a faster than expected rate and are keeping a close eye on potential fiscal spending by the Trump administration and will react accordingly. The fiscal spending is expected to increase inflation especially in the current fairly tight labor market. Speaking of interest rates, the 3 month U.S. LIBOR rate has risen above the 1% mark for the first time since 2009. The LIBOR is the index for setting the interest rate for loans, credit card interest rates and variable rate mortgages. Obviously all of these are now more expensive.

Overnight the major report came from China with a composite index of both the manufacturing and service sector hitting a four year high. Translation: the Chinese economy is beginning 2017 in much better condition than many had thought.

It’s a quiet beginning with the Dow down 10 points this morning.

Oil

• WTI rises 93¢ closing at $53.26.
• Some OPEC nations repeat commitment to production cuts.

Oil prices rose yesterday with WTI posting a hefty 93¢ gain 1.8%, closing at $53.26. Brent rose 99¢, also 1.8%, settling at $56.46. The first two trading days of the month have been extremely volatile. On Tuesday morning WTI was up $1.25 only to close $1.39 lower. Yesterday it captured back a big chunk of the losses, and this morning WTI is up 70¢. Yesterday’s API report showing crude inventories fell 7.4 million barrels drove prices higher overnight. The market was looking for only a 1.7 million barrel decline.

Courtesy of MDA Information Systems LLC

Natural Gas

• Warm weather continues to weigh on prices.
• Natural gas drops 6.9¢ to $3.267.

The warm weather forecast we saw Tuesday morning continues to make the bull’s yoke heavy with the bears pushing natty down 6.9¢ yesterday with the February Nymex contract closing at $3.267. That really sums it up. It’s Thursday and the EIA will be releasing its weekly natural gas storage report which traders always gets traders attention. The market is looking for a 75 Bcf withdrawal. The weather forecast is little changed from yesterday and if anything is warmer in the 11-15 day time frame than yesterday which is pushing natty 3.8¢ lower this morning.

Elsewhere

Being I’ve been caught in meetings all morning I’m keeping today’s Elsewhere brief. Per the insightful Yogi Berra, “You better cut the pizza into four pieces because I’m not hungry enough to east six.”