Good morning. You wouldn’t have known by the end results yesterday but it was a pretty crazy ride intraday. The day began with the Institute of Supply Management reported its index of national factory activity fell to 53.2 in May from 54.9 in April sending stocks falling. They then came out and said “Whoops, my bad” and corrected the report showing activity actually rose in May with a 55.4 index showing indeed economic activity continues to increase from a horrible first quarter sending stocks rising. As I mentioned last week, folks are expecting a Q2 GDP of 3.9 or 4.0% which is incredibly strong and compares to a contraction in Q1. The ISM survey also hinted at a pick-up of inflation pressures with manufactures reporting an increase in raw material prices. In a separate report the Commerce Department reported construction spending increased 0.2% in April to an annual rate of $953.5 billion. So what does that mean? How about that construction spending is at its highest level since March 2009. Now that you can comprehend. The stock market continues to climb the Wall of Worry, particularly when it looks at the bond market, with the Dow and S&P 500 closing at new record highs, albeit ever so marginal for the S&P gained a single point to close at 1,943 while the Dow gained a tad more percentage wise up 26 to 16,744. The Nasdaq was the laggard falling 5 to 4,237.

This morning Asian markets closed mixed but European markets are all trading lower which is pulling our Dow down, 39 points. European shares are lower on a report showing consumer price inflation slowed to 0.5% (worries of deflation). This shall give the ECB cover to announce an easing of monetary policy after its Thursday meeting. That being said, this action by the ECB has been widely expected and lot of it is already priced in the market.

Natural gas keeps creeping up closing 7.0¢ higher yesterday at $4.612. Heat in the south kept the Gulf Coast cash market bid with cash trading a couple of pennies over futures. And this did not escape trader’s eyes. This morning the forecast shows we’ll have some above normal temperatures in the short term and the 11-15 forecast is showing some warmth returning primarily to the southwest. This market is going to closely follow the cash market and any boost in temperatures is going to boost natty prices. This morning we’re up 2.1¢

Oil slipped a little yesterday with WTI closing down 24¢ at $102.47. Brent lost a tad more, 58¢, to $108.83. Just some chatter for both. This morning the chatter continues with WTI down 15¢.

Under federal regulations unveiled Monday the U.S. power sector must cut carbon dioxide emissions by 30% by 2030 from 2005 levels. The EPA proposal, and the centerpiece of the Obama administration’s climate change policy, is one of the most significant environmental rules proposed by the U.S. and could transform the power sector which relies on coal for nearly 38% of its electricity. Under the rules states will have flexible means to achieve the targets regardless of their current energy mixes. Unsurprisingly, the states which rely heavily on coal-fired plants will have the toughest jobs meeting the goals. Fortunately, the 645 page plan doesn’t look as ominous as feared with targets easier to reach because emissions have already fallen by about 10% by 2013 from the 2005 baseline level in part due to the retirement of coal plants in favor of cleaner burning natural gas. The EPA’s report states the plan would translate into a $7 health benefit for every dollar invested. Major hurdles remain for the EPA’s proposed rules and are expected to be challenged on whether the agency has overstepped its authority. U.S. coal producers like Arch Coal, Peabody Energy and Alpha Natural Resources share price closed at or near multi-year lows yesterday. Ouch. Have a good day.

Related articles

 

• Wonkblog: Wonkbook: How Iraq’s chaos could shake energy markets