Good morning. The Conference Board reported yesterday that U.S. consumer confidence jumped to its highest level in 6 ½ years in May, 85.2, way beyond economists’ expectations and separately the Commerce Department announced sales of new single family homes rose a stunning 18.6%, the highest rate since May 2008. These reports add to previous data that point to a sharp rebound in growth in Q2 after the economy contracted at a 1.0% annual pace in Q1. Awesome news. Time to get longer of equities. And if you had done that you would have gotten spanked yesterday as the Dow lost a material 119 points, 0.6%, the S&P 500 fell 13 points, 0.6%, to 1,950 and the Nasdaq closed down 18, 0.4%, at 4,350. The day was looking pretty good with stocks climbing and then at about noon central time all the buyers turned and looked at each other saying “You buying?” and when no one was the selling came in. Like that old game, no one wanted to be holding the hot potato at the bell. I’m sure electronic trading exacerbated the move. (I just finished reading Michael Lewis’ new book Flash Boys about how high frequency traders scalp the market. A good read!). As I mentioned yesterday, the summer doldrums look like they’ve set in as well as maybe some investor complacency and volatility (VIX) near record lows so material moves can occur on small volume.

This morning when I came in things were pretty quiet with Dow futures meandering on either side of unchanged but that all changed when the Commerce Department released 3rd and final Q1 GDP report. Setting the stage for you, the last revision the government did showed the economy contracted to 1.0% from 0.1%. Well folks, that was the good news. In its latest revision the government is saying the GDP in Q1 actually shrank a stunning 2.9%! This is the biggest decline since early 2009 at the end of the Great Recession. Consumers spent less on healthcare and other services and exports were lower as well as sales of U.S. produced goods. On that “wonderful” news Dow futures immediately fell 36 but the market has nicely rebounded being up 16 as I write.

Oil was sedate yesterday with WTI falling 14¢ to $106.03 while Brent rose 34¢ to $114.46. The big news yesterday came out after the market closed and that was the Obama Administration through the Commerce Department giving Pioneer Resources and Enterprise Products Partners permits to export domestically produced “unrefined” crude oil known as “condensate.” This is an ultra-light form of crude oil from shale formations which refiners overseas can turn into gasoline, diesel and distillates. So what’s the big news? Well this is the first time in nearly 40 years the government has allowed crude oil to be exported. Now for the record, all along refined products have been permitted to be sold to foreign buyers and in fact are consistently month to month the largest or second largest U.S. export.

Immediately after the news WTI prices shot up in after hours trading, as well as Pioneer’s and Enterprise’s stock price!, but once traders realized these were “one offs” (last evening the Commerce Department went out of its way to report there has been “No change in policy on crude oil exports.”) WTI settled back down and is only 7¢ higher than yesterday’s settle. That would be called a classic “whipsaw.”

After losing 8.5¢ on Monday the July natural gas contract rebounded almost the exact same amount yesterday rising 8.9¢ to $4.535. It’s the same old story with the bulls snorting how low storage levels are and the brunt of the summer still to come and the bears noting production increases and strong storage injections with no hot weather to date or insight. Again, the derivative traders are focusing on the cash market. Today’s forecast is similar to yesterday’s looking fairly benign. Today July Nymex options expire and tomorrow the futures contract expires setting the price for many folks’ natural gas and electricity supply prices for next month. Natty is basically flat to yesterday up 0.9¢ as I write.

Due the harsh winter coal stockpiles at the nation’s coal plants are at 6 year lows and these levels naturally need to be returned to “normal.” So how does one do that? Well of course by bringing in more coal by rail car. Well it turns out that is not as easy as it has been. It appears there is intense competition for those rail cars primarily driven by demand to ship crude oil. Burlington Northern said recently that its volume of crude oil shipped rose 230% from what it carried 7 years ago and even that it accounts for only 5% of what the railroad carries. The 5% however is at the margin and it is always at the margin in any market where effects are felt and in this case it is in the form of “delays.” Demand for rail cars was so high that in November of last year BNSF carried a stunning 10% of all US crude oil production. BNSF put into operation an additional 325 locomotives and slowly the situation is improving. Doesn’t Warren Buffet’s Berkshire Hathaway own BNSF? Have a good day.