Equities and the Economy:

• Dow and S&P continue to post record highs.
• FOMC embarking on QT.

The FOMC concluded its two day September meeting and being it played out very much in line with expectations investors road the trend taking the Dow and S&P 500 higher. The gains weren’t much but enough to take the two indexes to record highs. The Dow rose 42 points to 22,413 and the S&P 500 gained a scant 2 points ending at 2,508. The Nasdaq closed down 5 points at 6,457.

The big event yesterday was the conclusion of the FOMC’s September meeting and subsequent Yellen press conference. I mention the press conference for Yellen’s Fed tends not to do much when there’s not a scheduled press conference and make policy changes when there is a press conference. The Fed didn’t change interest rates keeping the federal funds rate between 1% and 1.25% but it did announce that for the first time in 9 years beginning next month it will begin reducing its $4.2 trillion balance sheet by $10 billion a month. Yellen described the “unwind” as gradual and predictable. That beings said folks, quantitative tightening (QT) is bearish of stocks. The FOMC also said to expect one more interest rate hike this year. Being there’s no press conference in November and there is in December, if it happens it will occur in December.

Here’s one for you, and your 401K or stock portfolio. Last week the current bull market we’re in, which is often described as the most despised bull market in memory, became the strongest bull market since the end of WWII in 1945. Earlier this year it celebrated its 8th birthday and is the second oldest bull market only behind the 1990 to March 2000 run.

Regarding economic news, August existing home sales dropped for the 4th time in 5 months falling 1.7% from July with real estate agents complaining about a lack of inventory.

Overnight Japan’s Nikkei tested one year highs. Locally the Dow is down 9 points.

Oil

• Oil prices hit 4 month highs.
• EIA weekly report marginally bearish.

Oil prices continued their march higher yesterday with the October WTI Nymex contract settling for the month 93¢ higher at $50.41. Brent closed up $1.15 at $56.29. Crude prices are on course for a 16% rise this quarter which would mark their largest Q3 rise in 13 years. Pushing prices higher is chatter from OPEC of extending the current production cuts, and maybe even deepening them. Additionally, Iraq, which is currently not included in the production cut agreement, is in discussions to be included in the next agreement. This is important because Iraq, and Nigeria, have increased production significantly since the production cut agreement began.

Yesterday the EIA released its weekly storage report which was marginally bearish. U.S. crude inventories rose for the 3rd consecutive week building 4.6 million barrels which was about 1 million barrels more than forecasts. Gasoline inventories fell 2.1 million barrels which was pretty much at forecasts. Traders are shrugging off the material rise in inventories as temporary and due to Hurricane Harvey. Refineries are still recovering from Harvey. Refinery utilization was up 5.5% w-o-w to 83.2% but that’s still well below the 5 year average of 92.9%. The agency also reported that U.S. production continues to grow. Domestic output rose by 157,000 bpd last week to 9.510 million bpd. Pretty amazing considering the week before we got hit by Harvey.

This morning I’m seeing a little profit taking with WTI down 34¢.

Natural Gas

• Natural gas prices easing.
• Cash market slipping.

We came in Monday with a very strong cash market which pushed front month prices up to $3.166 with electric utilities coming in short with the hot weather over this past weekend as well as a hot 5 day forecast. Since then prices have backed off a little and yesterday the October contracted slipped 2.8¢ closing at $3.094. The strength in the front month is also pushing the calendar strips higher. Calendar 2019 is up about 8¢ from its recent low which was in June.

Today is Thursday and that means storage report day. The market is looking for an injection of 90 Bcf. Last year for this week we had a 54 Bcf and the 5 year average is 73 Bcf. So this would be a healthy injection. We need it. Storage levels are about 7% below last year at this time.

This morning’s weather forecast is definitely mild after the current heat wave dissipates with the 11-15 day forecast, which traders trade, showing mostly normal temperatures, which means no load. But remember you bears, a lot of nukes are down for maintenance and that electric generation will be replaced with natural gas fired generation.

This morning natty is down 3.9¢.

Elsewhere

10 amazing facts about the human body:

• The largest cell in the human body is the female egg. Ironically, the smallest is the sperm cell. A woman’s egg is actually the only cell in the body that is visible to the naked eye.

• Teeth are the only part of the human body that cannot repair themselves.

• Your eye are the same size from birth to death, but your nose and ears never stop growing.

• Even though the brain processes pain signals, the brain itself does not actually feel pain.

• It takes seventeen muscles to smile and forty-three to frown.

• Your skeleton keeps renewing itself every 10 years, which means every decade you get a new skeleton.

• The strongest muscle in the body is the tongue. The hardest bone is the jawbone.

• Contrary to popular belief sweat doesn’t smell bad. Body odor is caused when the skin’s bacteria feed on sweat. It’s the bacteria’s waste products that cause the bad smell.

• Inside your belly button “live” thousands of bacteria that could literally form an ecosystem the size of an entire rainforest.

• According to most scientists, humans are the only animals on earth who produce emotional tears.