Good morning. Equities fell modestly yesterday as investors wait for a big batch of economic data beginning today and culminating with Friday’s July labor report. Additionally, the FOMC ends its two day meeting today and we’ll see its post meeting communique this afternoon. The day started out well with the Conference Board reporting that the all-important consumer sentiment rose from 86.4 in June to 90.9 in July which is the highest this index has risen since October 2007 pushing stocks nicely higher. Unfortunately for us all, traders and investors lost their enthusiasm as the day wore on and the Dow ended 70 points lower at 16,912, the S&P 500 lost 9 to 1,970 and the Nasdaq slipped a couple of points to 4,443.

Photo:  Modern-day meeting of the Federal Open Market Committee at the Eccles Building, Washington, D.C.  Source: The United States Government.

This week mark’s the half-way point in the Q2 earnings season and are on track to climb 8.8% over the year. At the start of the “season” analysts were predicting an increase of 6% so things are looking good so far. Speaking of earnings, do you own Twitter? If you do you just increased you net asset value 30%! Twitter reported earnings yesterday and actual revenue blew out estimates with it doubling in Q2 (but I bet if you own the stock you knew this because that baby is so volatile I bet you check it three times a day!).

Asian shares took a break after seeing multiyear highs closing mixed and European stocks are doing the same. Here in the States Dow futures are up a nice 64 points with the first of a plethora of reports that being the government reporting Q2 GDP grew at a rate of a whopping 4% which was much better than the 3.2% economists forecasted. This is really good news because if you remember Q1 GDP was negative (the economy contracted) primarily due to the brutal cold weather the Midwest and east experienced in that time frame (coldest in 34 years east of the Rockies!).

Oil was mixed yesterday with WTI losing $0.70 closing at $100.97 while Brent gained 15¢ to $107.72. WTI is feeling the weight of a strengthening U.S. dollar which is now at a 4 month high against a basket of major currencies. Brent’s got the ying-yang thing working with conflict in Libya, Iraq and Gaza offset by reports of more than ample supplies coming out of the North Sea and West Africa. It looks like the West is ratcheting up the pressure on Putin with new sanctions being announced and this time Europe, and very importantly Germany, is jumping on board. Brent traders are trying to sort that out with increased tensions offset by a possible negative impact on western Europe economic activity.

Last night the API reported U.S. crude stocks fell by 4.4 million barrels last week which was much greater than forecasts. This is putting a bid into the market this morning with WTI up 52¢. But as I’ve said many times, you must take the API data with a grain of salt for reporting is voluntary. The DOE’s weekly report today is much more relevant for reporting is mandatory. That being said, people do use the API data to tweak their model forecasts.

Yesterday was the last day the August natural gas contract traded and it expired up 6.1ٕ¢ at $3.808 on some minor short covering which is not all that surprising for the contract has just gotten obliterated over the past 3 weeks to 8 month lows. Starting today September becomes the prompt month and do you know what that means? If you’re a “paper” trader (do not trade the fungible) which the hedge funds are, summer’s over! Even if you are a physical trader, more specifically a bull, your horns have been shaved down to nubs with all the blue that’s been on the map for most of July. You can see below the eastern 2/3rds of the nation is going to get normal to cool weather now through mid-August. As I mentioned, the September contract is now prompt trading down 4.4¢ as I write.

With sanctions looking to increase on Russia I thought I’d do some research on the economy there. 68% of Russia’s 2013 export revenues came from exporting crude oil, petroleum products and natural gas. Folks, the Russia economy is nothing but a gas station like you see on the corner. Europe, including Turkey, receives most of the crude and products as well as virtually all the natural gas exports. Russia did recently diversify somewhat doing a 30 year deal with China worth $400 billion. So, you want to hurt Russia? You hit them in the oil and gas pocketbook. This is not as easy as it seems though because Russia and Europe do a tremendous amount of trade and Russia could cut off natural gas supplies to Europe which could very well detrimentally affect a tenuous European economy. That’s why it, unfortunately, took the downing of a passenger airplane by a Russian made missile to get the Europeans off center and confront Putin and his expansionary foreign policy. Have a good day.