Good morning. U.S. equities started the day on Friday flat, traded there all day and closed the same with the Dow closing down 18 points at 17,635, the S&P 500 ending flat to Thursday at 2,040 and the Nasdaq gaining 8 to 4,689. For the week the Dow and S&P gained 0.4% and the Nasdaq rose 1.2%. I think stocks are “taking a breather.” We’ve had a big run-up over the past 3 weeks and like a big advancing army. Bivouacking is necessary with supply lines needing to be reestablished. The U.S. dollar rallied on Friday helped by unexpectedly strong U.S. retail sales data. After stripping out volatile gasoline and food retail sales for October were up a much stronger than expected 0.5%. If I was a retailer I’d feel pretty optimistic about holiday sales this year.

The week is starting out shaky with equities around the world trading negative. The drag is Japan where it was announced today that GDP for the 3rd quarter fell a surprisingly large 1.6%. The market had been expecting GDP to have grown 1.5-2.0% so this is a big “miss.” Importantly, this comes after GDP fell 7.3% in Q2 when a new “consumption tax” went into effect. With this new data Japan is technically in a recession which is defined as two quarters of negative growth. Now we know why the Bank of Japan unveiled its Halloween surprised of a new round of QE. Obviously they saw the GDP data coming. You know the story. Ben Bernanke wrote the book. When in an economic hole, print money!

So here are the numbers this morning. Asian markets ended lower with unsurprisingly Japan’s Nikkei 225 getting hit the hardest closing down a whopping 3%. That’s like the Dow falling 529 points! Now here’s some good news. The European markets were all trading lower when I got to my desk this morning but they’ve fought their way back to unchanged from Friday. Closer to home U.S. stocks are trying to climb back to Friday’s close but are still all negative with Dow futures down 35 points.

Oil finally found a bid on Friday with WTI closing $1.61, 2.2%, higher at $75.82 and Brent up a hefty $1.92, 2.4%, at $79.41. Boosting prices Friday were rumors, more like speculation, that OPEC may announce a production cut at its November 27th meeting in Vienna. Friday’s price bounce though was not enough to prevent oil from ringing up its 7th consecutive weekly loss. For the week WTI lost 3.6% and Brent 5.4%. Last Thursday both WTI and Brent settled at their lowest level since September 2010.

This morning the bears are once again making their presence felt with WTI down 92¢. I’m sure some of this is on the news of Japan’s disappointing GDP. By the way, ministers from Venezuela and Iran are out making the rounds visiting their OPEC brethren trying to build a consensus for higher oil prices ahead of the cartel’s meeting in 10 days. I can hear it now “We must get prices higher for the benefit of all members.” They then go into the hallways and call their head of production stating “Man, you gotta find a way to get more oil out of those wells!”

Since I’m on the topic of oil, last Friday the House of Representatives voted to approve the construction of the Keystone Pipeline by a vote of 252 to 161 with 31 Democrats joining the Republicans. An identical bill in the Senate is scheduled to be voted on tomorrow with 60 votes needed for it to pass. Now the Republicans have the majority in the Senate but not 60 so they’re going to need some of their colleagues “across the aisle” to part with their party to pass the legislation. That would then set up a show down with President Obama who could veto it or pass it defying his environmentalist supporters. Watch the fireworks!

Natural gas rallied 4.3¢ on Friday to close at $4.020. I’m sure some of that was short covering ahead of the weekend. And the shorts covered sure are happy they did this morning for natty is up 15.1¢ as I write. Just look at the weather forecast amigos and you’ll know what’s going on. Chilly air is once again returning the eastern third of the country kicking up those HDD’s. This is why nat gas traders get up at 3:30 AM. To see the new forecast and try to get a jump on the market.

On Friday the EIA announced in a one day delayed natural gas storage report the U.S. injected 40 Bcf last week. This was about 2 Bcf greater than expectations but I’d call it close enough. The U.S. now has 5.7% less gas in the ground than we did last year and 6.1% less than the 5 year average. Early indications are that we will see something around “0” for this week’s storage number.

Courtesy of MDA Information Systems LLC

When prices fall in commodities M&A activity always picks up and this is no exception. As we all know, oil prices have fallen precipitously since this summer and the first acquisition has been announce. And it’s a doozy! Halliburton has announced it’s buying Baker Hughes for $34.6 billion in cash and stock. This represents the largest oil services deal ever. Halliburton’s theory is that by buying the maker of drill bits and pressure pumping tools it, the 2nd largest oil field services company next to Schlumberger Ltd., will gain more market clout which will help insulate it from a sustained oil market downturn. By the way, the deal has a clause where if the acquisition falls though Baker Hughes gets a nice $3 billion!

Get ready to hear more of these deals amigos. Buyers with cash to spend aren’t going to let the cheapest valuations in years pass them by and targets threatened by lower oil prices may become more willing sellers. Have a nice day.