Equities and the Economy:  

• Dow and S&P 500 fall marginally for the week. Nasdaq up about 1%.
• U.S. consumer feeling pretty good.

U.S. stocks ended little changed on Friday although the tech heavy Nasdaq continues to be the workhorse. The Dow fell 5 points to 19,886 while the S&P 500 gained 4 points 2,275. The Nasdaq posted its 6th record close of 2017 rising 27 points, 0.48%, to 5,575. For the week the Dow and S&P fell very marginally while the Nasdaq tacked on almost 1%.

Several pieces of economic data came out Friday. The University of Michigan released its preliminary reading on consumer sentiment for January noting sentiment remains at December’s 13 year high. The report also showed that consumers’ assessment of current conditions hit the highest since January 2004. The other important report was U.S. wholesale prices which rose 0.3% in December led by more expensive gasoline, food and cars. The Producer Price Index, which measures price changes before they reach the consumer, increased 1.6% last year. Remember, the Fed is looking for 2% inflation. Another data point which showed consumer confidence was on the rise in December with retail sales up 0.6%. Overall, the consumer feels pretty good right now.

After being down briefly 100 points early the Dow has fought back and is now trading off just 21 points. It’s being dragged down by the European Markets which are down markedly on the much anticipated speech by British Prime Minister Theresa May outlining how the UK is going to exit (Brexit) from the European Union. The big question investors have is whether it will be a “hard” or “soft” exit. Based upon Ms. May’s speech Brexit will be towards the “hard” side with the UK negotiating new trade agreements with its European partners. The UK plans to officially file for exit in March 2017 and has two years to implement the plan.

Oil

• WTI trading on either side of $53.
• Rig count drops for the week.

Oil prices have been meandering of late roughly trading $3 on either side of $53 WTI since early December. On Friday WTI fell 64¢ closing at $52.37 and Brent was off 56¢ at $55.45. Oil prices came under pressure on Friday on a report out of China that exports fell to their lowest level since 2009. Remember China is the world’s second largest consumer of oil. Lower exports mean lower energy needs.

Baker Hughes reported Friday in its weekly report that the U.S. oil rig count fell by 7 last week. The natural gas rig count rose by one. The decline was not isolated to one state but spread across seven. I believe the decline was due to the very cold weather early in the week making it difficult to move rigs around. Expect a bounce back in this week’s report.

Today WTI was up $1.05 but has backed off and is now trading up just 31¢. Prices are getting a small boost on another report out of China today stating oil production in the country is expected to decline a material 7% in 2017 from 2016 due to aging oil fields and higher breakeven costs.

Natural Gas

• Prices little changed.
• Bears cautious on weather forecast.

Natural gas prices were little changed with the February Nymex contract closing down 3.3¢ at $3.419. A week or so ago prices were trading down in the $3.20’s but a couple of private forecasting services put out reports of a cold front coming at the end of January which brought in buyers. Additionally, last Thursday’s EIA storage report was bullish supporting prices. This morning the end of January forecast is now in the 11-15 day time frame and while cold is penetrating the U.S., it’s mostly in the Rocky Mountain region and the south, and the temperature anomalies are not that severe in the south. The big question in traders’ minds is whether the cold will migrate east to the major gas consuming regions of the country. With the weather very warm, relative to normal, over the next 2 weeks and the future cold not that cold, traders are taking a wait and see attitude with natty down 2.3¢. Chatter. That being said, being January and February are traditionally the coldest months of the year and some forecasters are predicting a cold March, sellers are not going to be too aggressive.

2016 was a banner year for natural gas consumption. Per the EIA, last year was the first year natural gas use in electric power generation surpassed coal consumption. Natural gas generated 34% of the nation’s electricity compared to coal’s 30%. For 2017 it’s going to be closer with both commodities forecast to produce about 32% of the country’s electricity. The “rebalance is due to higher natural gas prices in 2017. 2016 natural gas prices were the lowest in nearly 20 years.

Elsewhere

More interesting facts about our presidents:

• George Washington had bank. Research from Wall Street 24/7 listed him as the wealthiest president of all time with assets worth more than $500 million.
• Thomas Jefferson did a lot of great things for our nation, including inventing the swivel chair.
• James Madison was only 5’4” and weighed under a 100 pounds.
• The capital of Liberia, Monrovia, is name after James Monroe after he worked with the American Colonization Society to help create a state where freed slaves could live.
• John Quincy Adams was a free spirit evidenced by his early morning skinny dip sessions
• Andrew Jackson taught his parrot to curse. It cursed so much it had to be removed from the president’s funeral.
• John Tyler was really unpopular. In his 1862 obituary the New York Times said he was “the most unpopular public man that ever held any office in the United States.
• Millard Fillmore’s wife was actually his teacher when he was a 19 year old schoolboy at New Home Academy.
• James Buchanan was the only president to never marry.
• Andrew Johnson was wasted during his inauguration. He was visibly drunk from drinking too much whiskey beforehand.