Equities and the Economy:

• Stocks again close at record highs.
• Dow has biggest daily gain in 3 months.

Buoyed by continued progress on tax reform, investors came out yesterday clicking the “buy” button sending the 3 major U.S. equity benchmarks to record highs, again. The Dow popped a huge 226 points, 1.1%, to 28,837. The blue chip index posted its largest daily gain in 3 month. The S&P 500 added 36 points, 1.0%, to 2,627 and the Nasdaq finished up 34 points at 6,912. The driver yesterday was continued progress toward tax reform with the Senate Budget Committee voting 12-11 to advance the Republican tax bill. A full vote of the Senate could come as early as Thursday. Investors shrugged off North Korea’s launching of a new form of intercontinental missile which is capable of reaching the U.S. mainland.

On the data front, the Conference Board’s consumer confidence index jumped to 129.5 in November, well above the 124.8 forecast marking a 17-year high. Separately, S&P CoreLogic Case-Shiller reported that their national home price index rose in September by 6.2% annually posting the fastest annual rate since June 2014. Seattle, Las Vegas and San Diego had the largest y-o-y gains.

This morning stocks continue to march higher with the Dow up 73 points.

Oil

• Prices end little changed.
• OPEC votes tomorrow on extending production cuts.

Oil prices posted modest losses yesterday with WTI closing down 12¢ at $57.99 and Brent off 23¢ at $63.61. Prices have been buoyed lately and have priced in OPEC approving the extension of the current production cuts at their meeting tomorrow in Vienna. OPEC may be on board but rumblings began on Monday that Russia may be balking wanting an extension until only June. Reuters reported that a major Russian production project led by ExxonMobil was preparing to ramp up output by 25% next year. If Russia doesn’t agree, prices are vulnerable.

Yesterday evening the API reported in its weekly crude and products report that crude oil inventories rose last week by 1.8 million barrels, counter to forecasts of a drop of 2.0 million barrels. Offsetting this bearish news, gasoline inventories fell by 1.5 million barrels vs. expectations of a rise of 1.2 million barrels. All-in-all the report was pretty neutral. Oil prices are reacting accordingly with WTI down a marginal 25¢ this morning.

Courtesy of MDA Information Systems LLC

Natural Gas

• December Nymex contract expires strong.
• Weather forecast continues to trend colder.

I haven’t seen it in a while, but yesterday I witnessed a big short squeeze in the December Nymex contract with it expiring for the month up a big 14.6¢, 5%, to close at $3.074. Prices have rallied more than 40¢, 15%, to within a nickel of this month’s earlier 5 month high. Short term movements in the natural gas price are heavily dependent on weather in the winter months and over the past month and a half the weather forecast has had huge swings between very cold, very warm (current weather) and back to very cold (today’s weather forecast for the 11-15 day time frame showing much below temperatures for the eastern U.S.). These forecasts have caused big swings in the natural gas price and yesterday’s December expiration happened to occur on a cold weather forecast.

This morning the January Nymex contract becomes the prompt month and is up a hefty 8.9¢ with the weather forecast trending colder.

Elsewhere

China’s Cultural Revolution (1966-1976) was set in motion by Communist Party Chairman Mao Zedong. The Revolution’s stated goal was to purge capitalism and Western thought from China’s society and re-impose Maoist thought. Boy have things changed. Why do I say this? Because last night Victoria’s Secret had their famous, globally viewed fashion show in Shanghai! The show had some major challenges in getting produced. The Chinese government’s heavy hand caused numerous headaches. Gigi Hadid, one of the top models, was denied a visa because of a slight she made in February mimicking the eyes of an Asian person. Superstar Katy Perry was slated to perform but her visa was pulled when authorities became aware of her 2015 performance where she paraded a Taiwanese flag and wore a dress covered in sunflowers. The year before Taiwanese anti-China protestors had chosen the sunflower for their cause because they are seen as the symbol of hope. Perry wasn’t the first superstar to feel the Chinese government’s wrath. Maroon 5 was banned a few years ago because one band member wished the Dalai Lama a happy birthday on Twitter.

Complicating matters is the producers of the show feared they were being spied on and emails were being read and were reluctant to call upon help from their U.S. headquarters for fear of having their missives used against them.

So why did Victoria’s Secret choose Shanghai as a venue knowing there were going to be major hurdles in producing the show? Because not going unnoticed by Victoria’s Secret management is that while intimate apparel sales have matured in the West, they’re booming in China. Lingerie is among the fastest growing segments of the Chinese women’s apparel market with sales reaching $17 billion in 2015 and projected to grow by another 32% by 2020. China’s women are a growing consumer force and increasingly have discretionary income to spend.

Mao is turning in his grave!