Equities and the Economy:

• Nasdaq back to its winning ways.
• Housing market still on fire.

The Dow and S&P 500 ended little changed on Friday with the former slipping 3 points to 21,385 and the latter rising 4 points to end at 2,438. The Nasdaq, which had a flash crash earlier this month, is back to its winning ways. On Friday the index posted a 29 points gain, 0.5%, finishing at 6,265. While this is still about 56 points off its all-time high, the tech heavy index is roaring back posting a gain of 1.8% for the week. This compares to the Dow ending just about flat for the week and the S&P logging a 0.2% gain.

On Friday the Commerce Department reported new home sales for May at 610,000 units and April’s figures were revised up by 28,000 to 597,000. This was slightly better than forecasts, but here’s the data point that was astounding. The median price of new homes rose a stunning 16.8% to $345,800, a new record.

This morning U.S. equities are taking their cue from European stocks which are trading materially higher pulling the Dow up 76 points.

Oil

• Prices bouncing off 11 month low.
• Oil rig count at 2 year highs.

Oil prices bounced off of 11 year lows posting a second consecutive day of gains on Friday with WTI closing up 27¢ at $43.01 and Brent settling 32¢ higher at $45.54. Technically, the market looks oversold and I expect this level to hold and maybe we get a small bounce from here. This assumes that compliance with the OPEC production agreement continues to hold and there’s not a “black swan” event, which would send prices materially higher.

As Ronald Reagan said, “There you go again,” only this time I’m talking about the U.S rig count, which has posted 23 consecutive weeks of gains! On Friday Baker Hughes reported the oil rig count increased by another 11. The natural gas rig count fell by 3. The U.S. rig count is now 941, a two year high with the oil rig count at 758, the highest since April 2015.

This morning WTI is marginally higher up 28¢.

Here’s a bit of trivia for you. Do you know where the name for North Sea oil “Brent” comes from? Supposedly, it was named after the Brent goose that populated the area. However, it might have also gotten its name as a mnemonic device from the five different oil fields there: the Broom, the Rannock, the Etive, the Ness and the Talbert.

 

Natural Gas

• Prices back near $3.00.
• Warm weather returning.

After hitting a 3 month low last week at $2.855 natural gas prices have been slowly rising. On Friday the July Nymex contract posted a 3.5¢ gain closing at $2.926 and this morning we’re up another 5.9¢ which takes us within 1.2¢ of $3.00. Boosting prices this morning is a bullish weather forecast for the 11-15 day period showing above normal temperatures for most of the country. This will follow this week of very low demand with below normal temps for the eastern half of the country. It’s really going to be hard to push prices lower, at least before the fall, with storage levels 10.5% below last year and the longer term forecasts showing July and August to have temperatures above normal for most of the country.

Here in Texas, on Friday ERCOT set a new June demand record reaching over 67,500 MW’s. The prior peak was June 15 last year at over 65,000 MW’s.

We’re in the full swing of July “bid week” now through Friday which is when the physical buyers and sellers of natural gas do their deals. Bid week data is collected and used to determine the monthly indexes. On Wednesday the July Nymex contract expires.

Elsewhere

Here’s a dying (or better said, “dead”) business: U.S. uranium production. In 1980, the U.S. uranium industry produced about 44 million pounds of uranium concentrate, which is the product refined from uranium ore. In 2016, only 2.9 million pounds were produced. That’s a drop of over 93%! And if Q1 2017 production is extrapolated you get a measly 1.8 million pounds for the entire year! Employment peaked in 2008 at 1,563 employees. In 2016, just 38!

Domestic nuclear generation now relies heavily on foreign-origin uranium, much of which is enriched domestically.