Equities and the Economy:

• Stocks post marginal gains.
• Nasdaq posts 2nd consecutive record high.

U.S. stocks eked out gains yesterday with the Dow closing 36 points higher at 20,950, the S&P 500 up 3 to 2,391 and the Nasdaq gaining 4 at 6,095, enough to close at a record high for a second consecutive day. The tech heavy index was supported by Apple, the largest U.S. company by market cap, which rose 0.6% and at its own new record high. Equities are being driven higher by earnings which have been terrific, the best in 4 or 5 years. I’m telling you, if we can get anything out of Washington in tax reforms the market will go vertical!

One of the reasons there wasn’t much price action was because there wasn’t any significant economic reports yesterday. Today, however, we have two events. First, ADP will release it jobs report for April. Investors look at this report closely as a barometer to Friday’s important Labor Department Employment Situation Report. Second, the FOMC concludes its two day meeting today. I don’t expect they’ll make any changes to interest rates today.

The markets in Hong Kong, Japan and South Korea are closed today for holidays. The Dow is down 44.

Oil

• Prices get walloped yesterday.
• Close at 6 week lows.

Boy it’s been rough for the oil producer of late. Prices continued their descent yesterday with WTI closing down a material $1.18 at $47.66 and Brent shed $1.06 settling at $50.46, its lowest level this year. While a Reuters survey released yesterday showed that OPEC’s oil output fell for the 4th consecutive month in April with Saudi Arabia keeping production below its allotment, it wasn’t enough to offset higher output from the U.S., Canada and Libya. U.S. production is at its highest level since August 2015 and Libyan production is at its highest since December 2014 with the national oil company stating it plans on boosting production. Yesterday’s closes were at, or very close, to technical support levels which were established in early March. The bulls need the $47.00 level to hold.

The API released its weekly crude and products report after the close yesterday and the bulls can take some solace in it. All three categories showed actual declines in inventories greater than forecasts. That being said, I’m not seeing it translate into price for WTI is up only 29¢, which I call chatter. If $47 is broken, the next support levels are $45.25 and then $42.20.

Courtesy of MDA Information Systems LLC

Natural Gas

• Whipsaw day yesterday.
• Prices consolidating.

Although prices on a multi-day basis appear to be consolidating around the $3.20 level, traders got whipsawed yesterday. When I came in yesterday morning prices were flat from Monday’s close. The bulls then came in on reports some weather models were suggesting a warmer solution and natty popped 6¢. Once the buying stopped however, the market sold off and at day’s end the June contract settled down 2.0¢ at $3.195. There’s a tug-of-war going on out there right now. On one side you have healthy demand from LNG, Mexican exports, storage injections, A/C load coming and production down y-o-y. On the other side is that renewable generated electricity is at a record high, including a huge year coming for hydroelectric power, and the fact that the higher gas prices go, the more market share it’ll lose to coal. Just this last winter due to the higher natural gas prices natural gas lost 1.6 Bcf/d in the electric generation market to coal.

This morning natty has been waffling around with it being up 1.3¢ as I write.

Elsewhere

Speaking of renewables, U.S wind generating capacity continues to grow. Per the EIA, wind generators now account for 8% of total U.S. operating capacity, more than any renewable technology, including hydropower, which has previously been the powerhouse in this category. More than half of the wind capacity is located in 5 states: Texas, Iowa, Oklahoma, California and Kansas. Nine states currently have no utility-scale wind capacity: Alabama. Arkansas, Florida Georgia, Kentucky, Louisiana, Mississippi, South Carolina and Virginia.

Source: U.S. Energy Information Administration