Equities and the Economy:

• Nasdaq finishes at new record high.
• Main indexes post 5^th consecutive monthly gain.

U.S. equities ground higher yesterday with the Dow closing up 60 points closing at 21,952 and the S&P 500 adding 14 points finishing at 2,472.  The Nasdaq gets all of the attention though with its gain of a hefty 60 points and closing at 6,429 setting a new record high surpassing the one on set on July 26^th.  For the month the Dow logged a 0.3% gain and is up 11% for the year.  The S&P rose a meager 0.1%.  The Nasdaq was the star gaining 1.3% for the month.  With August’s gains the three indexes logged a 5^th consecutive month of increases.

Turning to the economic news, the Commerce Department reported that consumer spending rose 0.3% in July which was 0.1% less than Wall Street was looking for but this was offset by personal income rising 0.1% and greater than forecasts coming in at 0.4%.  The person consumption expenditures price index rose 0.1% for the month and 1.4% for the 12 month period.  This data point is very important because it is the Fed’s preferred measure of inflation.  The 1.4% is well below the Fed’s target of 2.0%.  Although the Fed has been telegraphing it wants to raise interest rates one more time, the market doesn’t believe it for the investors are pricing in only a 33% probability of it happening.

This morning the Dow is up 58 points.  The big report today is the government’s employment situation report for August.

Oil

• Prices pop
• OPEC reports output fell in August.

After 4 sessions of lower closes oil prices rebounded hard yesterday with WTI closing up a big $1.27 at $47.23 and Brent adding $1.52 settling at $52.38.  Boosting prices were two factors.  With prices getting so beat up of late traders finally realized that U.S. crude inventories are continually dropping working on rebalancing the market.  Second, OPEC reported that its output fell 179,000 bpd in August.  Even with yesterday’s gains WTI lost 5.9% for the month.

As I’ve been saying all week, with 25% of U.S. refinery capacity shuttered gasoline prices have been rapidly increasing, which none of us will escape.  Yesterday the September gasoline futures contract skyrocketed 25.5¢, 13.5%, closing at $2.140/gallon (remember that’s the wholesale price).  For the month the gasoline rose 26%!

Interestingly, the U.S. Energy Department announced the emergency release of 1 million barrels of oil form the Strategic Petroleum Reserve for delivery to a refinery in Louisiana amid an effort to boost gasoline suppliers.  This release certainly gives the impression the refineries that are operating are having a hard time finding crude.

This morning the bears are back out of their caves.  WTI is down 53¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• EIA storage report comes in at forecast.
• Prices rally to close at 1.5 month high.

While the EIA’s storage report came in at expectations, an injection of 30 Bcf, it was another injection below historical averages.  Last year we had an injection of 46 Bcf and the 5 year average is an injection of 67 Bcf.  This was the lowest injection for this week in at least 5 years.  Current inventory levels are 7% below last year and the surplus to the 5 year average we’ve had all spring and summer has been wiped out now being flat to the 5 year average.  On the storage report the October contract popped a material 10.1¢, 3.4%, closing at $3.04 MMBtu.  Yesterday’s close was the highest closing price in a month and a half.  It’s been a good month for the bulls.  Natty prices rose 8.8% in August.

This morning natty is quiet down 0.8¢

Elsewhere

This is a picture from the original, 124 year old patent for perforated toilet paper.  Debate resolved!  Have a wonderful Labor Day weekend, and please say a prayer for all those on the Gulf Coast who are trying to put their lives back together.