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Europe: +44 (0) 207 198 1634 Good morning. It looks like the world came back from the World Cup in a state euphoria taking global equities higher beginning with the Asian markets, continuing with the European and following through here in the U.S. The Dow climbed a material 112 points, 0.7%, to 17,055, the S&P 500 added 10 points, 0.5%, to 1,977 and the Nasdaq rose 25, 0.6%, to 4,440. This is a nice turnaround from last week when the S&P lost 0.9%. There were no major economic reports released yesterday but stocks here in the U.S. were boosted by Citicorp’s earnings reporting better than expected results. They also reported they had agreed to pay a $7 billion (yes, that’s with a “b”!) fee to settled a federal probe into its mortgage securities business which one would have thought would have dragged the stock down but such was not the case. The stock ended up 3% on the day. Investors looked past the fee and focused on the earnings numbers as an indicator of the business climate in the broader market.
Photo by Warrenski / Licensed under CC BY-SA 2.0
The Asian markets got some follow through overnight on the coat tails of the U.S. markets but European markets are currently trading on either side of unchanged. Here in the U.S. the Dow is staring up 50 points with everyone is waiting for more earnings reports. Unlike yesterday we’ll have a plethora of economic reports some of which I’ll discuss tomorrow.
Energy was moribund yesterday. WTI added 8¢ to $100.91 while Brent climbed a tad higher, 32¢, closing at $106.98. Chatter. The term structures are currently looking quite bearish. Brent, which has been in backwardation for months, has recently moved to contango and WTI’s backwardation for the September ‘14/September ’15 spread has fallen from $5.79 a month ago to $3.56 this morning. This is definitively not bullish price action. Term structures are tidal in nature and where the informed money plays. The market is telling us global supplies are ample and are bidding for storage. This morning things are quite different with WTI trading down $1.23, below $100, and at multi-month lows.
Natural gas did nothing yesterday. The August contract fell 1/10th of 1¢ settling at $4.147. The entire range for the day was only 8¢. We’ve fallen pretty hard the last few weeks and are trading at 6 month lows. We’re at some important price levels right now. The weather forecast is giving the bulls no “love” with the 11-15 turning bearish relative to yesterday. As I’ve said before, the bulls are running out of summer. The jet stream pattern that brought Siberia to the Midcontinent and eastern U.S. this past winter is hanging around bringing very mild (actually cold temperatures for the Midwest) killing A/C load. This morning is a repeat of yesterday with natty down 0.2¢.
The Wall Street Journal recently celebrated its 125th anniversary and printed some comparisons between then and now. One of those was in agricultural production. According to the newspaper, back in 1889 the U.S wheat crop was expected to be 19.2 bushels/acre, which was a new record. At the same time farmers grew approximately 26 bushels per acre of corn. Today the American farmer is producing nearly 45 bushels per acre of wheat and, get this, an astounding 165 bushels per acre of corn. We live in amazing times. There is more amazement ahead. Have nice day.
