Good morning. Last week ended great on Friday with U.S. equities surging. The Dow jumped 195 points, 1.1%, to 17,391, the S&P 500 climbed 23, 1.2%, to 2,018 and the Nasdaq leaped 65, 1.4%, to 4,631. And, oh, did I mention the Dow and S&P closed at record highs?! Whoo-hoo! I felt like I was on the wildest rollercoaster ride at the amusement park in October. The Dow began the month slightly above 17,000 but by mid-October it had fallen more than 5% taking it into negative territory for the year. And then we end at record highs! I’ll take it but it’s a heck-of-a-way to get there! For those keeping score, record, the Dow’s previous record close was 17,280 set on September 19th. The S&P’s previous closing record came on September 18th at 2,011. For the year the Dow is up 4.9% and the S&P a stunning 9.2%. Remember, this is in addition to the S&P’s 30% gain in 2013! Although the Fed is putting the brakes on its unprecedented stimulus program the Bank of Japan, which announced it would increase asset purchases for the first time in over 1 year and a half, and the ECB have kept the world awash in cheap money creating support for assets such as stocks. The U.S. dollar hit a 6 year high against the Japanese yen while safe-haven assets such as Treasury bonds and gold declined with gold futures hitting a 4 year low. For those of you with Asian stock holdings, Japan’s Nikkei on Friday closed at its highest level in 7 years.

It wasn’t all QE that helped the market on Friday. The University of Michigan reported its index of consumer sentiment rose to 86.9 from 84.6 in September. That’s the highest level since July 2007, 5 months before the Great Recession began. Separately, the Labor Department reported its employment-cost index rose 0.7% in Q3. This is the 2nd consecutive quarter that employers’ labor costs have picked up. On the surface this may seem negative but this is exactly what the Fed wants to see both in terms of unemployment and inflation getting the latter to their 2% target. It will also fuel the debate of when the Fed will raise interest rates. I’ll just say this. It appears the U.S.’ economy is really coming around. As they say in one of my favorite countries, “Good on ya!”

So U.S. equities are launching themselves into November at record highs but investors are starting the day cautiously with Dow futures down 7, which is an improvement from when I came in when it was 35. The Asian markets closed mixed but the European bourses are all lower this morning by 0.5% – 0.7%. Dragging the markets down was disappointing manufacturing data in both the euro zone and Asia. Final euro zone manufacturing PMI data for October showed activity picking up compared to September but came in less than economists forecasted. In China, a report was released showing the services sector grew at its slowest pace in 9 months as a cooling property sector weighed on demand.

Usually oil has the second position in my Report but natural gas trumps it today. The weather forecast has turned materially colder this morning from last Friday showing some substantially colder temperatures for the eastern half of the country in the 6-15 day frame (see below). After closing on Friday for the 4th consecutive day gaining 4.6¢ at $3.873 natty is going apogee this morning being up 16.4¢ and trading over $4.00. Remember this. There is always a high correlation between natural gas prices and the weather in the winter, more specifically, the weather forecast. Now from experience I can tell you cold blasts early in the season don’t affect prices like late winter (i.e. March) cold blasts because early in the season there’s plenty of gas in storage. Keep in mind though we’re entering this winter with 9% less gas in storage than last year and the 5 year average so the market is going to be vulnerable to price spikes.

The strengthening U.S. dollar is the nemesis of oil, and all commodities priced in the U.S. dollar, and it weighed upon prices on Friday with WTI closing down 58¢ at $80.54 while Brent lost 38¢ at $85.86. The U.S. dollar and OPEC’s “price war” is pushing prices lower. OPEC’s members boosted production to a 14 month high of 30.974 million bpd in October led by Iraq, Saudi Arabia and Libya. Add that to U.S. production which rose last week to its highest level since 1983 and you can just feel the weight on oil prices. The result, in October both Brent and WTI had their biggest monthly loss in more than 2 years. All that being said, it is impressive that WTI continues to trade above $80. Multiple times over the last couple of weeks the bears have tried to push WTI below $80 and every time it has bounce back. This morning it’s still above $80 up 8¢.

Courtesy of MDA Information Systems LLC

Guess what’s showing up on Instagram? No, not selfies but pictures of gasoline prices having a $2 handle! The national average price of gasoline fell 33¢ ending October at $3.00/gallon and fell Saturday to $2.995 according to AAA. This is the first time in four years that gas have been cheaper than $3.00 with the U.S. on track for the lowest annual average since 2010. And get this, the “sages” are forecasting the average price in 2015 to be lower than this year. In the past a stronger economy in the U.S. typically meant rising fuel demand. No longer. Americans are driving more efficient vehicles and our driving habits are changing. Analysts believe the number of miles travelled per household and gallons of fuel consumed per household peaked in 2004. Here are some additional facts about cheap gas.

The drop from last year’s average price of $3.51/gallon will save the typical U.S. household about $50/month.

The drop will save the U.S. economy $187 million a day.

It will take an extra 1.5 years to make purchasing a higher priced, better mileage Toyota Prius instead of at Toyota Corolla pay off.

New York has the highest price at $3.365/gallon in the continental U.S. while South Carolina and Tennessee are the lowest at $2.74.

Gasoline is once again cheaper than milk. In September the national average price of milk was $3.73/gallon. The annual average for milk is on track to be more expensive than the annual average for gasoline for the first time since 2011. The gap is even bigger for you lovers of bottled water. A case of a dozen 1.5 liter bottles of Evian on Amazon.com cost $38.99 which translates into $8.20/gallon.

Have a nice day.