Good morning. Back in H-town again after a stint in SoCal. Went from awesome weather to a heat index of 103, which is the reason I always go there in August! So let’s see how things have changed over the last 8 calendar days. The last Morning Energy Report was published on 8/13 reflecting market closes of 8/12. On that day the Dow closed at 16,561, the S&P 500 at 1,934 and the Nasdaq at 4,389. Yesterday the Dow rose 60 points ending at 17,039, the S&P added 6 to 1,992 and the Nasdaq climbed 6 to 4,532. So over the past week +1 the Dow is up 2.9%, the S&P 3.0% and the Nasdaq is 3.3%. Now that may not seem like much but if you extrapolate that it would make for a very excellent year! So how good has this past 8 days been? Well yesterday marked the 4th day stocks rallied carrying the S&P to a new record high. The Dow remains 0.6% below its July 16th high and the Nasdaq is at its highest close since March 2000 in the middle of the dot com bubble. The recent gains cap a market rebound from a brief swoon in July when we saw the S&P drop 1.5% ending a 5 month winning streak.

Equity prices were driven higher yesterday by a steady stream of upbeat economic reports. Every Thursday the Labor Department releases its applications for unemployment benefits report and yesterday’s showed a bigger drop in applications than the market was expecting. Initial claims fell 14,000 from last week to 298,000 with the market expecting over 300,000. Also released yesterday was Markit’s “flash” manufacturing purchasing managers index which came in at 58.0 up sharply from July’s 55.8 and above expectations showing strong growth in employment. The Philadelphia Fed’s manufacturing index for its region came out even stronger rising to 28 in August from July’s 23.9. And finally, existing home sales in July rose 2.4% compared to June to an annualized pace of 5.15 million units which was nicely above the 5.0 million economists were expecting. So as you can see, the economy conditions to improve with the Fed even going so far as to say things are approaching pre-recession levels.

This morning equity futures here in the U.S. are flat lining relative to yesterday’s close. The big event of the day will be Fed President Janet Yellen’s speech this morning following the Fed’s two day annual meeting in Jackson Hole, WY with listeners looking for clues on when the Fed will begin raising interest rates.

Eight days ago WTI closed at $97.37 and Brent at $103.02. Since then WTI has fallen $3.41, 3.5%, closing yesterday at $93.96, up 51¢. During the same period Brent dropped only 39¢ settling yesterday at $102.63, up 35¢. Crude’s rise yesterday was on the coattails of stronger economic data and rising equities. Overall though and despite all the geopolitical strife, oil has been under pressure from reports of ample global supply accompanied by flat global demand. Also pressuring oil, and all commodities, is the U.S. dollar which has been rising over the past month relative to other currencies and as I’ve mentioned numerous times, all things being equal, a stronger U.S. dollar is bearish of commodities priced in U.S. dollars. This morning WTI is giving up all its gains from yesterday trading down 60¢.

Natural gas closed at $3.974 a week ago from last Tuesday and has been under some marginal downward pressure during that time frame closing at $3.889 yesterday, up 6.6¢. During the last 8 days natty has lost 2.1%. There’s been a battle going lately between healthy production offset by the fact natural gas is at a price level where it’s capturing market share in the electric generation market from coal which most definitely supports pricing, especially with U.S. storage levels at deficits to last year and the 5 year average. Speaking of storage, the EIA released its weekly storage report yesterday showing the U.S. injected 88 Bcf last week which was slightly higher than expectations and hence marginally bearish. Storage levels are now 16.4% below last year at this time and 17.5% below the 5 year average. So what was natty’s price action yesterday? It rose 6.6¢. Why? The cash market.  Over the next 5 or so days the eastern U.S. will experience the hottest weather of the year meaning those peaking electric generators will be kicking on burning natural gas.  The current heat wave will abate in the 6-10 day time frame and then slightly above normal temperatures will return for the 11-15 day time frame but note that time frame is in September which means we’re way past the peak CDD days.

It’s been a quiet hurricane season so far (thank goodness!) with the only current activity an area of disturbance in the Atlantic north of the Virgin Islands. The NOAA gives this area an 80% chance of development over the next 5 days but fortunately it’s projected path is to stay east of the continental U.S.

Today natty is very, very quiet with the September contract down 0.9¢ with some of the outer months not even having traded.

I’m so glad it’s Friday. I can recover from my vacation during which my two teenage daughters ran me (pleasantly) ragged! Have a nice weekend.