Good morning. Some bad news in the housing market weighed on U.S equities yesterday. The National Association of Realtors reported sales of previously owned homes (existing) unexpectedly fell in August for the first time in 5 months. Sales fell 1.8% to 5.05 million annualized pace from a revised 5.14 million pace in July. The expectation (for that is what’s built into markets) was for sales near 5.2 million. Interestingly, it was investors, not homeowners, who retreated from the market. The housing market, which has been a focal point of the Fed (along with employment and inflation) has been struggling with buyers burdened by tight credit conditions and slow wage gains. The all-important first time buyer, i.e., recent college graduates, are saddled with enormous college debts effectively shutting a great many of them out of the market. As Rex Macey, chief allocation officer at Wilmington Trust Investment Advisors succinctly put it, “Housing is just too important to the economy and to have this kind of weakness puts a pretty dark cloud over the market.” On the negative news stocks sold off with the Dow losing a material 107 points ending at 17,173, the S&P 500 closed down 16 and back below 2,000 to 1,994 and the Nasdaq, where all those “momentum stocks” are, dropped a huge 52 points, 1.14%, to 4,528. The S&P suffered its worst one day decline since early August and closed below its 14 day moving average for the first time since September 15th (the 14 day MA is a key short term momentum indicator.)

This morning overseas Germany reported its manufacturing PMI slumped to 50.3, its lowest reading since June 2013 and below forecasts. Additionally, a services industry PMI for France, Europe’s 2nd largest economy, faltered after just two months in growth territory. On the news London’s FTSE is taking its biggest tumble since the start of March with the effect rippling across the pond with the Dow down 45.

Commodities in general have been under a lot of pressure lately and oil has been no exception. On the heels of negative equities oil fell with WTI closing down 89¢ to $91.52 and Brent off a significant $1.42 settling at $96.97. Prices to some producers are getting to levels attracting attention from senior management. For example, due to transportation constraints in the Permian Basin (west Texas) and Bakken (North Dakota) producers are getting $12 or more less than WTI posting. That’s putting their price at the well head below $80. The netback to the Canadians in Alberta is even worse. Now we’re still over the important $70 level but obviously this is a far cry from the $95/bbl they were receiving a few months ago.

Oil is getting a bid this morning with WTI up 56¢ on some better than expected manufacturing news out of China. Additionally, as I’m sure most of you know by now, the U.S., aided by other nations in Europe and Middle East, has launched a rather massive series of air attacks upon ISIL for the first time in Syria. An escalation of conflict in the Middle East always increases the “fear premium” in oil.

Natural gas was uneventful yesterday closing up 1.3¢ at $3.850. As I mentioned yesterday, since late June we’ve been trading between $3.724 and $4.10 spending most of the time waffling on either side of $3.90. The driver has been the cash market which has been driven by the weather with last week’s cold event pushing prices up and benign weather pushing them down. Speaking of the weather, the forecast is little changed from yesterday and I read it as very little load especially in the 6-15 day time frame. If you folks in the northeast and Midwest don’t get rain during this time frame you’re going to have some spectacular weather! This morning natty is again converging on that magic $3.90 level being up 2.7¢.

I know this is an energy newsletter which means it’s associated with commodities which provides me a segue to the next subject, grains. I don’t know if you’ve been following the grain markets but the harvest is under way and we’re looking at an incredibly bounteous, record yield this year. The weather this summer has been nearly perfect and the USDA Crop Progress reports the nation’s corn crop rating to be 75% “good/excellent” with the 5 year average of 53% and last year’s 55%. The soybean crop is rated 71% “good/excellent” compared to 54% for the 5 year average and last year’s 50%. Reports from the field are that corn yields are coming in 25-40 bushels/acre better than last year and soybean yields are correlatively high. Wonderful for the consumer. Not so much for the farmer with corn prices 50% of what they received last year. How’s the saying go? Make it up on volume. Have a good day.