Good morning. U.S. equities started the day nicely in the green but could not hold their gains being dragged down by sharp declines in momentum stocks (internet, biotechs, social media) after the Federal Reserve suggested the valuations on those may be stretched. When the Fed dis’ a sector it’s always a buzz kill. Being the aforementioned stocks are mostly traded on the Nasdaq it took the big hit of the day falling 24 points, 0.5%, to 4,416. The Dow and S&P 500 fared much better with the former ending the day up 5 at 17,061 and the latter down 4 at 1,973. Investors focus yesterday was on Fed Chairperson Janet Yellen who spoke before the Senate Banking Committee. Her comments were pretty much as expected, save for the one on momentum stocks, noting the economy is bouncing back from a horrible Q1 2014 but the recovery is not complete and that even though the unemployment rate has dropped there is significant slack in the labor market markets. She also mentioned that inflation is below the Fed’s target of 2%. Consequently a high degree of monetary accommodation remains appropriate. That is interpreted as the federal funds rate will remain between 0% and 1/4% for a while. She did add she expects QE to end in October. But remember now, the Fed’s balance sheet is huge and although they’ll not be buying incremental assets, they will continue to buy assets (bonds) as the existing assets mature so although there won’t be new money in circulation, there will be plenty of it. So steady as she goes.

Photo: Poor Me by Garrett Coakley / Licensed under CC BY-SA 4.0

There were a couple of important economic reports released yesterday. The Empire State (New York area) General Business Condition’s Index for July rose to 25.6 from June’s 19.2 and was much better than forecasts. Offsetting that, retail sales were disappointing increasing only 0.2% whit economists forecasting 0.6%.

This morning we’re again starting out very nicely with Dow futures up 63 points. The Asian market closed mixed but no major index moved materially however the European markets are roaring with all the major indexes up over 1%. European stocks are getting a nice boost on a strong round of mostly upbeat data on the labor market there. I guarantee U.S. stocks futures are riding the coattails of the action in Europe.

Oil slumped again yesterday with WTI falling 95¢ settling at $99.95 with Brent falling a penny more to $106.02. The market is adequately supplied and the “fear premium” is eroding with ISIS not making advances in Iraq and not disrupting oil production. Also, when was the last time you heard about Ukraine? Oh, maybe a comment or two but things seemed to have gone from a boil to a simmer there. Meanwhile, it’s reported that Libya’s oil production has ramped up faster than expected to about 554,000 bpd. Bottom line, none of the above is bullish. This morning WTI is being pulled up 85¢ on higher equities.

Natural gas slipped 5.0¢ closing at $4.097 which is a 6 month low. Natty has fallen 80¢, 16%, over the past month and to within 3% of its 2014 low. A big driver of this bear move is the weather, i.e. lack of any sustained heat waves in the eastern U.S. You folks in the Midcontinent know what I’m talking about. Your highs are 8-10 degrees below normal currently causing electric generation units that were running a week ago to be now idling or even turned off. You perpetual bears be careful. We’re at some important price levels right now. This morning’s forecast is once again goring the bulls. There’s some warm in the upper midcontinent and east but it is bookended by below normal temperatures. If you’re a derivatives trader, i.e. not trading the physical, you can now see all the way through the expiration of the August contract. All the way through the end of summer for the September forecast will begin in 2 days. Summer’s over. Derivative traders are now going to be shifting to thinking about the winter.

This morning natty is getting a bounce being up 3.6¢. Come on you bears. The market can’t go down every day!

I’m not sure you heard but actress Melanie Griffith is going through a painful divorce from Antonio Banderas. However, the removal of her tattoo with the first name of her husband may be almost as painful. She may take solace in that she’s not alone. Revenue or tattoo removal has surged 440% to an estimated $75.5 million over the last decade. And it’s still growing expecting to hit $83.2 million over the next 4 years. Most tattoo removals are performed on people in their 30’s and 40’s. It appears that was is attractive in your 20’s is not so attractive in your 30’s. Relationship breakups and job hunting has led to a surge in tattoo removals with the cost generally beginning at $500. I have two girls, 13 and 15, and am preaching about this all the time. Hope it sinks in. Henna anyone?

Have a good day.

Related articles

• Asian Futures Fall After U.S. Retreat as Crude Oil Slides