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Europe: +44 (0) 207 198 1634 Good morning. I warned you last week of the probability of a lot of volatility. And we saw it Thursday and Friday. On Thursday the Dow got pummeled 161 points, 0.9%, its worst single day slide since April 10th, and then on Friday rebounded 123 points, 0.73%, to 17,100. The S&P 500 gained 20 points, 1.03%, and the Nasdaq had a huge day closing up 69, 1.57%, at 4,432. I’m sure orders for Maalox surged last week. Now the good news for almost every one of us is we’re not day traders so although we experience consternation on down days, we can ride the rollercoaster to its end. As I’ve mentioned often, we’re in earnings season and that’s what drove stocks higher on Friday. Google, the #1 internet search company, reported 2nd quarter results beating investor expectations lifting the entire market, especially tech companies overshadowing the geopolitical news of the downing of the Malaysian airliner and the war (that’s what it is) in Gaza. It’s stock rose 4.2% on Friday. Nice one day gain, eh? For the week the Dow rose 0.9%, the S&P 0.55 and the Nasdaq 0.4%. The CBOE Volatility Index (VIX) tumbled 17.1% after skyrocketing 32% on Thursday. 82 companies in the S&P have reported and 68% beat Wall Street expectations which is in line with the 67% for the past four quarters and above the 63% rate since 1994.
Photo: Equate Calcium antacids with Bottle by Parenting Patch / Licensed under Creative Commons Attribution-Share Alike 3.0 Unported license.
This morning the markets are getting hit with the Dow down 90 points. The Asian markets all closed lower and with the European markets are all trading significantly lower so the red is circling the globe. The blame for the current deposition is being pinned on geopolitical concerns tied to the conflict in Gaza and the specter of further sanctions on Russia for its alleged involvement in the downing of the airline. There is always a rush to match headlines with the leaning of futures so let’s blame those two events. However, it can also be said there isn’t any undue concern about those two headlines either. The economic news today will be anemic so let’s see how earnings season continues to unfold.
Both oil and natural gas were very quiet on Friday. WTI closed down 6¢ at $103.13 and Brent fell 65¢ to $107.24. Note that spread is now only $4.11 which the tightest I’ve seen in quite a while. It’s been a long time since Brent and WTI traded at parity which historically is the norm with WTI trading at a slight premium acknowledging it marginally better quality. However, it was the explosion of Bakken oil production being transported south and counter flow to historical U.S. oil flow and the resulting transportation constraints surround Cushing, OK, the delivery point of the Nymex WTI contract, that pushed WI to a discount to Brent with that spread one time reaching over $20.
This morning WTI is up 86¢ getting support from data out of China showing crude imports into the world’s 2nd largest economy increasing in June by 5.5%.
After getting bludgeoned on Thursday natural gas traders took Friday off with natty closing almost unchanged, down $0.003, at $3.951. This morning the forecast is coming in much cooler than what we saw on Friday with extremely mild temperatures in the eastern 2/3rds of the country for the 6-15 day time frame with pretty much normal temps in the 1-5 day period. We’re not going to see any natural gas peaking plants running for the foreseeable future. Being the north American natural gas system is for all intents and purposes a closed loop system, any gas not burned will be put into storage allowing us to continue to cut into the storage deficit going into winter, albeit we will still go into the winter below the 5 year average. On the bearish news natty is down 9.0¢.
Here’s one for the record books. A Florida jury just slammed R.J. Reynolds Tobacco Co. giving a woman whose husband died of lung cancer at age 36 an award of $23.6 billion and claiming the company concealed information that cigarettes are addictive and can cause lung cancer. Per the plaintiff’s attorney, “The jury wanted to send a statement that tobacco cannot continue to lie to the American people and the American government about the addictiveness of and the deadly chemicals in their cigarettes.” R.J. Reynolds is not thrilled about the verdict (understatement of the day) and will appeal.
On a logistical note, beginning tomorrow I will be at our annual company meeting in Stamford, CT for the rest of the week. I will be available by email and telephone however my response may be delayed so your patience is greatly appreciated. Have a good day.
