Equities and the Economy:

• After two down days stocks bounce back marginally.
• FOMC leaves interest rates unchanged.

U.S. equities bounced back marginally yesterday with the Dow closing up 27 at 19,891 which was disappointing because the index was up more than a 100 points intraday. The S&P 500 added only a point ending at 2,280 but the Nasdaq had a nice pop climbing a half percent, 28 points, to 5,643. The major newsworthy event was the FOMC concluded its two day meeting and as expected, left interest rates unchanged. The next meeting is in March but investors are betting there won’t be an interest rate increase then either. The FOMC is a little more dovish this year and combine that with “unknowns” associated with populist President Donald Trump’s it appears they will be erroring on the “looser” monetary policy side.

Turning to the economic data, ADP Research Institute released its private sector payroll data noting a shockingly large 246,000 jobs were added in January which was the best single month since June. Economists were forecasting something closer to only 165,000 jobs. This was a stunning start to the new year. The ADP data is a prelude to Friday’s Labor Department Employment Situation Report for January. Other data released yesterday was the IHS Markit Manufacturing Index’s final read for January which was 56. This was the strongest manufacturing production growth in almost two years!

Apple released Q4 earnings yesterday which came in better than expected. Investors pay close attention to Apple because it’s so big it’s a good barometer on the status of the economy. Apple’s earning show the consumer is in good shape.

This morning U.S. equities are on the defensive with the Dow down 24 but really directionless. By the way, gold is at a 12 week high with investors moving a little more conservative, i.e. out of risky stuff like stocks and into safe haven assets.

Oil

• Oil prices rally to 3 week high.
• OPEC compliance on production 82%.

WTI prices rose to a 3 week high yesterday gaining $1.07 settling at $53.88 and Brent closed up $1.22 at $56.80. The price gain was in the face of a bearish weekly DOE crude and products report which was even more bearish than Tuesday’s bearish API report. The API reported an aggregate rise in inventories of 11.0 million barrels. Yesterday the DOE reported a bigger increase at 12.0 million barrels. This was the 4th consecutive weekly increase in crude oil inventories and the largest since the week ending October 28th. Crude oil inventories are only 18 million barrels less than last year’s record high. However, traders cared less than about the DOE data and were more focused on an independent report yesterday noting OPEC has cut production over 1 million bpd, or 88% of pledged cuts. There were also news reports that Russia has reduced output by 100,000 bpd. Oil prices are also currently getting a tailwind from the U.S. dollar which is at its lowest level since Mid-November influenced by President Trump’s “point man” on currency valuations saying Tuesday that the Euro was “grossly undervalued.”

This morning WTI is sedate being up 5¢. Chatter.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices near 3 week low.
• Above normal weather forecast for next 2 weeks.

The March natural gas contract closed 5.31¢ higher yesterday at $3.168 bouncing off 3 week lows. The front month contract has lost most of its gains over the past few weeks on weather forecasts showing no threat of cold weather in the U.S. Today is Groundhog Day and Punxsutawney Phil crawled out of his hole seeing his shadow which means there will be 6 more weeks of winter. Maybe he should have stayed in his hole because weather forecasts for the next two weeks are very mild with 6-15 day time frame downright balmy showing above normal temperatures for the whole country!

Today the EIA releases its weekly natural gas storage report with the market looking for an 84 Bcf withdrawal.

This morning natty is down 3.9¢.

Elsewhere

So where did Groundhog Day originate? Well, it originated in the U.S. and is celebrated on February 2nd in Punxsutawney, PA. It began in 1887 when Clymer H. Freas, the editor of the local newspaper Punxsutawney Spirit at the time, began promoting the town’s groundhog as the official “Groundhog Day meteorologist.” According to folklore, if it is cloudy when the groundhog, Punxsutawney Phil, emerges for its burrow in this day the spring season will arrive early, sometime before the vernal equinox. If it’s sunny, the groundhog will supposedly see it’s shadow and retreat back into its den and winter weather will persist for 6 more weeks. In southeastern, PA, Groundhog Lodes celebrate the holiday with fersommlinge, social events in which food is served, speeches are made, and one or more g’speil (plays or skits) are performed for entertainment. The German dialect is the only language spoke at the event, and those who speak English pay a penalty, usually in for the form of a nickel, dime or quarter per word spoken.

The crowds get larger every year, but the largest crowd ever was in 1993 as a result of the popular, and hilarious, movie Groundhog Day starring Bill Murray (a must see!).