Equities and the Economy:

• Dow posts best intraday comeback in 9 months.
• Overall equities little changed.

Early yesterday morning it was looking really grim.  On the heels of North Korea launching a missile over mainland Japan, a not unprecedented but definitely provocative move, investors came in selling hard taking the Dow down about 135 points in early trading.  But then bargain hunters came in snapping up stocks and when the final bell rang the major indexes managed to eke out gains.  The Dow closed up 57 points at 21,865, the S&P 500 added a couple of points to 2,446 and the Nasdaq rose 19 to 6,302.  Yesterday was the Dow’s biggest intraday comeback since December 7, 2016.  Trading volume has been way below average even for an August when volume traditionally wanes and this makes the market vulnerable to large swings, like yesterday.

As investors shed risk yesterday gold prices rose for the third consecutive day closing at their highest level since September 29^th at $1,318.90/oz.

Turning to the economic data, the most important report was the Conference Board’s Consumer Confidence Number which came in a good deal better than expected.  Economists were looking for 120 and the actual number was 123.  The survey was taken before Hurricane Harvey hit and based on history we can expect the next report to show a drop in this number.

This morning its chatter with the Dow up and down, now down 24.

Oil

• Prices settle at lowest in more than a month.
• Gasoline price settle highest in 2 years.

With about 20% of the nation’s refining capacity shuttered the “crack spreads” (crude oil price vs refined products prices) has blown out.  Crude oil is “backing up” pushing prices down with WTI falling another 13¢ yesterday closing at $46.44, the lowest settle since July 24^th.  Refined products prices are moving dramatically in the opposite direction with gasoline closing up 7.1¢ to $1.783/gallon (wholesale) which is the highest price since July 31, 2015.  The crack spreads got a boost when Motiva Enterprises, who operates the U.S.’ largest refinery which is located in Port Arthur, TX, announced they were closing the plant due to flooding.  I don’t care where you live. You will be paying higher prices at the pump.

Brent actually closed up 11¢ at $52.00.  The Brent/WTI spread is now above $5, the first time that’s happened in 2 years.

Yesterday the API in its weekly report stated U.S. crude inventories fell 5.8 million barrels which was more than 4 times expectations.  Under normal circumstances that would be bullish, however, the shuttering of refinery capacity is trumping that and WTI remains under pressure this morning being down 36¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• September Nymex natural gas contract expires.
• Production beginning to return.

Yesterday the September Nymex natural gas contract expired at $2.961, up 3.6¢.  The Bureau of Safety and Environmental Enforcement stated 0.62 Bcf/d of natural gas production in the GOM was shut-in and that 3.0 Bcf/d of production in the Eagle Ford in Texas was shut-in.  That’s bullish, but offsetting that is the weather.  Harvey has been a load killer reducing A/C demand for natural gas not only in Texas but the entire southeast.  There’s no question the forecast is bearish, and it takes us into mid-September which is getting us into autumn in the Mid-west and northeast.

This morning the October forecast has its first day as the prompt month and is down 4.6¢ at $2.937.

Elsewhere

For the first time in five days we’re seeing the sun here in Houston.  However, many folks remain in harm’s way because today the rivers are cresting.  Additionally, the Army Corp of Engineers is releasing water from a couple of dams to preserve their integrity for fear of breaching.  This could flood homes that were previously not flooded.  If you’re not in the area you just can’t fathom what’s occurred here.  Here’s some facts to put this horrific event in perspective.  Officials are calling this a one in 500 year flood.  50 inches of rain fell in 4 days.  Houston averages 50 inches in a whole year.  For those of you in the northeast, Sandy dropped 13 inches.  9 trillion gallons of rain fell over 4 days.  How much is 9 trillion gallons of water?

• It would fill the Great Salt Lake, twice.
• It would fill the Empire State Building 33,906 times.
• It would cover New Orleans in 128 feet of water.
• It equals 9 days of Mississippi River flow.

The above statistics are astounding, but this is the one that shocked me,

• It would cover the entire Lower 48 States with 0.17 inches of water.