Equities and the Economy:

• Major indexes close higher for 4th consecutive day.
• Dow and S&P on longest winning streak since late February.

The three major U.S. indexes all finished higher yesterday, albeit marginally, marking a 4th consecutive day of higher closes. The Dow rose 43 points ending at 20,938 and the S&P 500 closed 4 points up at 2,398. Both indexes are on a winning streak not seen since late February. The Nasdaq ended up 5 points at 6,139, its longest win streak since May 10th.

U.S. economic news yesterday was mixed. The U.S. flash PMI reading for services for May rose to a 4 month high while the May manufacturing index dripped to an 8 month low. Other economic news was in the housing market. As you regular readers know, I’ve been stating for years that the housing sector has been the backbone of the economic recovery. Well yesterday the housing data was disconcerting. The Commerce Department reported that new home sales fell a surprising 11.4% in April from March to an annualized rate of 569,000 units. This was the single largest month-on-month decline in two years. Further, inventory rose to 5.7 months from 4.9 months. The inventory increase was due to both a slower rate of sales and an increase in the number of homes available for sale. In the past, changes in the “month’s supply” were due to a lack of inventory. Additionally, the median price of new homes sold was down 3.9% vs. a year ago to $309,200. Let’s see if this is merely a “blip” or if something more serious is happening here.

Overnight global stocks traded lower but have bounced back with the Dow up 33 points. There was big bear news overnight which was that Moody’s downgraded China’s credit rating one notch saying it expects the strength of the economy to erode in coming years as growth slows and debt rises. This is significant because the last time Moody’s downgraded China’s debt was 1989! Further, the bond credit rating company changed its outlook for China from “stable” to “negative.”

Oil

• Oil prices log 6th straight day of gains.
• OPEC meeting begins tomorrow.

Oil prices rose for their 6th consecutive day with WTI closing up 34¢ at $51.47 and Brent adding 28¢ to settle at $54.15. WTI is now up 11% over the 2 weeks. Prices continued to be buoyed by expectations OPEC will extend production cuts beyond June 30th. The only question is whether the term will be 6 or 9 months with the odds being a 9 month term.

Yesterday morning prices traded negative before rebounding on news the Trump Administration included in its 2018 budget to sell about half the oil currently in the Strategic Petroleum Reserve. This is really a non-event. First, this is just a proposal. Congress has got to approve the proposal and the final, approved, budget will look a lot different than the one put forth yesterday. Second, the reserves are to be sold over 10 years and are really negligible when looked at over that time frame.

Last evening the API released its crude and products report which was marginally bullish. While crude inventories dropped less than expectations, gasoline and distillate stocks declined more than expected. However, traders were not impressed with the report for WTI is trading flat to yesterday’s close. Today the DOE releases its weekly crude and products report.

Courtesy of MDA Information Systems LLC

Natural Gas

• Weather forecast moderates.
• June gas gets hit.

The overnight weather forecast yesterday shifted cooler and production was revised a little higher which brought the bears out of their caves. June natural gas fell 11.1¢ closing at $3.219. Once again though, all the action was in the front end of the price curve for the calendar strips ended virtually unchanged. We continue to waffle around the $3.20 area which is almost exactly where we are trading this morning with natty down 2.8¢. Yawn.

Elsewhere

On Tuesday I wrote that after 146 years the Ringling Brothers and Barnum & Bailey Circus closed down. Well I’m happy to say that the circus is not dead. John Ringling North II, from the Ringling clan, owns a circus called the Kelly Miller Circus. John purchased the circus in 2007 at the age of 66 but the show has been running since 1938. You probably have never heard of this circus, and for good reason. It’s target market is towns too small to have a Wal-Mart! Instead of 3 rings that can seat 10,000, it has one ring that seats 1,200. How would you like to keep this schedule? With the exception of Mother’s Day and Easter, there are two shows a day, seven days a week from March through October. During that time they travel through 18 states and 10,000 miles. Every day the tent goes up, they do their two performances, the tent comes down, and they repeat it the next day somewhere else. John watches every show when it’s on the road. And there are a couple of elephants. He gets his share of protestors but he said he has no intention of getting rid of the elephants. He says the publicity generally helps business by letting the public know they’re there.