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Good morning.  U.S. equities retreated yesterday with the Dow snapping a four day winning streak although I’d call it more a flesh wound than requiring triage.  The Dow lost 31 points closing once again below 17,000 at 16,974.  The S&P 500 ended down 3 points at 1,982 and the Nasdaq finished 15 points lower at 4,549.  The “excuse” for the selloff was the Fed’s post-meeting communique stating it indeed was ending its asset purchase program and would raise interest rates sooner than the market projected IF the economy grew faster than the bank projects.  What was notable was this was the first time the Fed made such explicit remarks about how quickly it could raise rates.  Now me being a “glass is half full” kind of person I’m looking at this on the positive side.  The Fed is saying it believes the U.S. economy is on firmer footing and there is clear evidence supporting that view including improving employment conditions.  Said another way, the Fed is moving toward normalizing monetary policy and they’re doing so because they believe the economy is improving.  And I believe this is good for stocks.  Oh yes, there will be bumps along the way (a nice way of saying buckle in for the volatility) but look how far the economy has come.  People have very short memories but remember where we were back in ’09 when unemployment was over 9%!  We’ve come a very long way!  And I thank Ben Bernanke who wrote his doctoral thesis on the role of monetary policy in affecting economic activity specifically with respect to the Great Depression and was handed the Great Recession.

One thing that is still bothering the Fed, and it’s what they’re using as a key indicator on when to raise rates, is inflation.  Or the lack thereof at this time.  Inflation remains well below the Fed’s target of 2% with wage rates continuing to be under pressure even as unemployment has fallen and commodity price increases being tepid at best and energy prices, as you well know because you read this report and fill up your car with gasoline, are much lower.  Oil is down 25% from its highs this past summer.  I just paid $2.799 for regular for a nationally recognized brand yesterday!

This morning U.S. equities are taking my “glass is half full” view with the Dow up 81 points but they’re a little schizophrenic with the S&P down 3 and the Nasdaq down 22.

Oil rose yesterday with WTI gaining 78¢ closing at $82.20 and Brent added $1.09 settling at $87.12.  This is really quite impressive considering that the U.S. dollar soared yesterday after the Fed mentioned that interest rates could rise sooner than the market expected.  As we all know, when the U.S. dollar strengthens relative to other currencies it makes commodities priced in U.S. dollars more expensive to those using other currencies all things being equal, but of course all things are never equal!  Helping the oil bulls was the DOE’s weekly crude and products report yesterday stating inventories on an aggregated basis fell 4.2 million barrels which was more than expected.  This morning Texas Tea is giving up all it gained yesterday and more being down 94¢ I’m sure influenced by the U.S. dollar’s continued strength.

Courtesy MDA Information Systems LLC

After jumping 8.8¢ on Tuesday natural gas rallied another 7.9¢ yesterday closing at $3.726.  This is a very important close because yesterday was the expiration of the November Nymex futures contract setting at least one “leg”, i.e. side, of many derivative contracts and more closer to home to you, the cost of your natural gas or electricity supply for November if it’s not already hedged.  Appears there was a little short squeeze the last couple of days probably driven by the cash market as utilities came out to buy for the cold snap currently hitting the eastern U.S.  It will most definitely be quite chilly on Halloween.

The EIA just released its weekly natural gas report showing the U.S. injected 87 Bcf into the ground last week which came right in with expectations of 86 Bcf.  The market is responding appropriately with a big yawn being up 1.4¢.  Have a nice day.