Equities and the Economy:

• U.S. equities have their worst day in 2017.
• Break history setting run without 1% loss.

It was bound to happen. Just when I write a paragraph on how the market has gone forever without a 1% we get one. Yesterday U.S. stocks logged their worst day in 2017 with 4 major indexes all experiencing over 1% losses. The Dow lost 238 points, 1.1%, closing at 20,668, the S&P 500 fell 29 points, 1.2%, ending at 2,344 and the Nasdaq was off 108 points,1.8%, to 5,794. The big loser though was the small-cap Russell 2000 which got whacked 37 points, 2.7%. Yesterday’s S&P loss broke a 109 day streak without losing 1% in a day. No need to panic. The S&P is now down 2% from its most recent peak but still up 4.7% for the year. In most years the index droops 10% or more from peak to trough during the year.

The impetus for the move is that the market is realizing that Trumpflation, i.e., looser fiscal policy via tax cuts and big infrastructure spend, might be more difficult to achieve. P/E ratios were at lofty levels pricing in a best-case scenario and an over-enthusiastic market just got a reality check. For example, there is serious concern about the Administration’s ability to get its proposed health care bill through Congress and the health care bill needs to pass before tax reform can be addressed. Investors are starting to position themselves for an environment in which the fiscal dividend they anticipated may be slower in coming and in lower in magnitude. And don’t forget, the Fed is tightening monetary policy that, while still very “loose,” is moving in a direction which doesn’t favor stocks.

This morning your 401K is still on the defensive with the Dow down 54 points.

Oil

• Oil prices close lower.
• Prices at 4 month lows.

The bears have been in control of late and yesterday was no exception. WTI lost 88¢ closing at $47.34. Brent fell 66¢ to $50.96. Both oils are at 4 month lows. This is despite the U.S. dollar trading at 6 week lows which is supportive. The API last evening reported a larger than expected build in crude inventories of 4.5 million barrels but this was offset by a larger than expected decline in gasoline stocks of 4.9 million barrels. We’ll call this a “push.” Let’s see if today’s DOE report confirms the API report.

Sources within OPEC have indicated that its members increasingly favor extending the production cuts but want the backing of non-OPEC oil members, such as Russia, which has yet to deliver fully in its commitments.

This morning WTI is feeling the pressure from equities down 63¢.

Courtesy of MDA Information Systems LLC

Natural Gas

The one bull market of late has been natural gas. The April contract closed up 5.2¢ at $3.093 and back at a one-month high we saw earlier this month. Futures have been driven by the strong cash market. After falling to $2.83/MMBtu over the weekend, Henry Hub cash traded $3.07 for gas day today marking a 40 day high.

As I’ve said numerous times, U.S. production is down 2.2 Bcf/d y-o-y and demand is up driven by the economy, LNG exports and Mexican exports. The difference in supply is being made up by Canadian imports which for March are averaging 5.4 Bcf/d month-to-date which is the highest level since 2010.

Below normal temperatures are gone in the Midwest and will soon be exiting the northeast which is weakening cash some this morning and natty is down 4.6¢.

Elsewhere

OK, here is some useless trivia. 10 facts you didn’t know about the Star Wars lightsabre.

1) It was originally called “laser sword.”
2) Roger Christian designed the lightsaber. He also designed R2D2.
3) The original lightsaber handle was white bladed. Subsequently it was changed to colored.
4) The unique sound was discovered by accident. The sound engineer accidently placed a microphone near the hum of an old projector and old television.
5) The lightsaber’s color depends on the crystal that focuses the energy.
6) Luke Skywalker’s lightsaber was originally blue. It was changed to green when the blue lightsaber got lost in the blue sky.
7) The total production cost for one lightsaber for the first Star Wars movie was $10.
8) The actual lightsabers used on set had a wooden pole where the “blade” would be in the movie.
9) The original handles of the lightsaber were made from antique camera flash handles. The builder found them in a box of junked items.
10) Scientists have been trying to recreate the lightsaber in real life. No luck yet. General Electric engineer Matt Gluesenkamp said the most plausible technology would be super-hot plasma. Don’t have that yet.