Equities and the Economy:

• Equities rebound on Friday.
• Post weekly loss.

After a rough week U.S. stocks rebounded on Friday with the Dow closing up 14 points at 21,858, the S&P 500 rose 3 to 2,441 and the Nasdaq added 40 points ending at 6,257. Friday’s gains were not enough to offset the losses incurred during the week. The Dow lost 1.1% for the week, the S&P was off 1.4% and the Nasdaq fell 1.5%. It was the Dow and S&P’s largest weekly drop since March. For the Nasdaq it was the biggest weekly drop since June. The Nasdaq has now closed lower for three consecutive weeks. Remember though, the Nasdaq was up 20% for the year prior to the recent decline. As I previously said, we’ve been in one of the longest bull markets in history. A pullback is overdue.

As equities fell last week investors flocked to safe haven assets, of which gold is one. The price of the precious metal rose 2.3% for the week and to its highest level since June 6th.

No significant economic reports were released Friday. The news that day was dominated by the rhetoric between President Trump and North Korea which became a little less “loud” over the weekend with various representatives from the Administration stating on the Sunday morning political talk shows that no action “was imminent” with North Korea. This has brought a little more calm to investors bringing in some buying this morning with the Dow up 107 points.

Oil

• Prices rise on Friday.
• Post weekly loss.

Similar to equities, oil prices rose on Friday but logged a weekly loss. For the day WTI rose 23¢ closing at $48.82 and Brent climbed 20¢ settling at $52.19. For the week though WTI and Brent lost 1.5% and 0.6%, respectively. OPEC’s report during the week showing the cartel’s production rose in July by ½% pushed prices lower.

Friday afternoon Baker Hughes released its weekly rig count report showing drillers added 3 oil rigs to 768 rigs but natural gas directed rigs dropped by 8. This follows the previous week’s rig count of a reduction of 1 oil rig. Bottom line here is the U.S. oil rig count has flattened out. Quit growing. This means that although oil production will continue to increase due to productivity gains, production growth will be much less than over the previous 12 months.

A year ago there were 464 oil and gas rigs working in the U.S. As of last week there are 949. In Canada, a year ago there were 122 oil and gas rigs working. Today, 220 rigs. The North American rig count is up about 100% from a year ago.

This morning WTI is up 14¢. Chatter.

Courtesy of MDA Information Systems LLC

Natural Gas

• Return of normal to above-normal temperatures boost prices.
• Prices log largest weekly rally of the year.

Although prices were little changed on Friday with the September contract closing down a meaningless 0.2¢ at $2.983. It was a strong week for methane with prices gaining 7.5%, the largest weekly gain since December. The return of the normal, hot August weather to the Midwest and East from the previous week’s below normal temperature forecast brought the bulls back into the market. That being said, at the “10,000 foot level” we’re still broadly waffling around that $3.00 level.

This morning’s forecast is showing some very warm weather for the Great Lakes regions, Midwest and East for the last week of August but interestingly, natty is down 3.9¢ as I write. That being said, natural gas consumption will be healthy during the term for the A/C load which will definitely support natty prices.

Elsewhere

We all know of the exploits of our first president, George Washington. But you may not know he was a very savvy businessman. In the late 1700’s he owned one of the largest distilleries in America and by 1799 he was producing 11,000 gallons of whiskey. Washington owes a big thank you to a Scot named James Anderson who convinced Washington that producing whiskey made from corn and rye grown on the plantation would be a natural complement to his milling business. Washington erected a 2,250 sq. ft. distillery making it among the largest whiskey distilleries in early America. Today it is a tourist attraction at Mount Vernon (I saw it this past June on a trip with my two daughters) that operates seasonally, mashing, fermenting and distilling grain as it was done in the 18th century.