Equities and the Economy:

• Dow and S&P close at record high.
• November jobs report strong.

U.S. stocks closed higher on Friday with the Dow logging a hefty 118 point gain to 24,329 and the S&P 500 adding 15 points to 2,652. Both are new record highs. The Nasdaq rose 27 points to 6,841 leaving the index about 1% off its record high. Both the Dow and S&P posted their 3rd straight weekly gain with the former rising 0.4% and the latter 0.35%. The Nasdaq slipped 0.1% marking its 2nd consecutive weekly decline.

The major report on Friday was the Labor Department’s jobs report for November. The U.S created 228,000 jobs for the month coming in better than forecasts of a 200,000 job gain. The unemployment rate held at 4.1%. Wages rose 0.2%. Although the unemployment rate has been very low, wage inflation has been muted and actually frustrating the Fed which is why they’ve been slow to rose interest rates. It does look now like inflation is starting to creep into the economy which is why the Fed will raise interest rates at its meeting this week which begins tomorrow and ends Wednesday. The Fed is trying to do the delicate balance of wanting to get ahead of inflation after a decade of QE while not being too quick at the trigger to raise rates which would hamper the economy.

In other news on Friday investors welcomed that both the Senate and House approved a 2 week funding bill staving off shutting the government down over the weekend. The bill buys time for President Trump and Congressional leaders to hammer out a longer-term deal.

In Europe investors cheered a breakthrough in Brexit talks between the U.K and European Union. The talks have been very tense lately casting a cloud over the equities market there.

This morning the Dow is up 45 points.

Bitcoin, which is THE talk in the market right now, passed a new and huge milestone last night. That’s when bitcoin futures contracts began trading on the CBOE Global Markets Exchange. This definitely gives more credence to the cryptocurrency. The importance here is that previous to last night bitcoin was not traded on any regulated exchange which kept many institutional investors on the sidelines. Now that it’s being offered through a regulated exchange (overseen by the SEC) traders will be more secure in placing their bets. I say “bet” because that’s exactly what they’re doing. This is pure gambling!

Oil

• Prices close higher for the day.
• Post weekly loss.

Oil prices closed higher on Friday with WTI settling up 67¢ at $57.36 and Brent popping $1.20 to $63.40 getting a boost from a threatened strike by Nigerian oil workers. Nigeria is Africa’s largest oil producer. Prices also got a boost from data out of China that crude imports rose to over 9 million bpd, up from October’s 7.3 million bpd. The import data for November represents the second highest monthly figure on record with imports rising 12% y-o-y for the first 11 months of the year. All that bullish news was not enough to overcome a week of slipping prices with WTI logging a 1.7% loss for the week and Brent off 1.9%.

Baker Hughes in its weekly rig count report on Friday stated drillers added 2 oil rigs last week to 752 rigs. That’s the highest level since September. That translates into more U.S. oil production which is already up more than 15% since mid-2016 at 9.71 million bpd and the highest since the early 1970’s and close to production levels of top producers Saudi Arabia and Russia. Remember, oil production is not linear. Oil producers are getting better and better at getting more oil production per rig, and at a lower cost.

This morning the oil market is pretty quiet up 15¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices close unchanged.
• Cold weather continues to retreat.

After hitting a 6 week low last week near $2.750 natural gas prices stabilized and closed virtually unchanged on Friday with January gas ending up 0.9¢ at $2.772. The calendar strips also closed basically unchanged. Remember, the lower prices go the more gas electric generators buy and every time we get to that $2.75ish area electric generator burn markedly picks up providing price support.

As is always the case, especially in the winter, traders watch every weather forecast update and the cold weather continues to retreat, albeit marginally. Temperatures in the northeast will remain cold through Christmas which will support the cash market, which is strong this morning. Add in buying from electric generators and you get a little price bounce with up 5.0¢. However, rising production is capping any major price gains. On Sunday northeast production hit a record high of 27.6 Bcf/d led by increased output in West Virginia.

Elsewhere

Literally everyone is fascinated with Bitcoin and blockchain. Admittingly, I’m one of them, but candidly, it remains quite nebulous to me. So here’s a little educating starting with blockchain, which is the ledger making cryptocurrencies viable. Per Wikipedia the blockchain is a public ledger that records bitcoin transactions. A novel solution accomplishes this without any trusted central authority: the maintenance of the blockchain is performed by a network of communicating nodes running bitcoin software. Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications. Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. The blockchain is a distributed database – to achieve independent verification of the chain of ownership of any and every bitcoin amount, each network node stores its own copy of the blockchain. Approximately six times per hour, a new group of accepted transactions, a block, is created, added to the blockchain, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary in order to prevent double-spending in an environment without central oversight. Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.

I’m sure that clarified it for you! All I know is that the inventor of all this, Satoshi Nakamoto, is way smarter than I am! By the way, the identity of Nakamoto remains unknown. No one knows if it’s a person or group.