Good morning. As I mentioned in yesterday’s report, ADP reported that according to their research private sector employers hired 281,000 new workers in June far exceeding forecasts by economists. This was a 1 ½ year high reinforcing views the economy is improving after a dismal start. GDP contracted 2.9% in Q1 but growth is forecasted to surge 3.5% in Q2. Reports were also released that automobile sales hit their highest level in almost 8 years in June and factories expanded at a steady clip. All this good news unfortunately did not translate into higher equities with equities ending mixed. The Dow closed up 20 points at 16,976, the S&P 500 added 1 to 1,975 and the Nasdaq actually fell 1 to 4,458. If you recall Tuesday, July 1st, was a great day for equities so maybe all the good news was “baked in.”

This morning the Labor Department just released it oh so very, very closely watched employment report for June (the Fed sure does). And it’s good news folks. Non-farm payrolls rose by 288,000 last month which was even greater than ADP’s number. Importantly to me, May’s jobs figure was revised upward by 29,000 jobs. As you regular readers know I put a lot of credence in “revisions” for in good times revisions are for the positive and bad times they are for the worse. The unemployment rate dropped from May’s 6.3% to 6.1% in June. June’s unemployment rate is the lowest since way back in September 2008 and down from its peak of 10% in October 2009. The labor force participation rate held steady at 62.8%. This is an important number for labor force participation affects the unemployment rate. The unemployment rate will go down and be a total head fake if the participation rate goes down so seeing it steady from May to June is good. Further good news came in the average hourly work week which rose 0.2% which is the equivalent of several tens of thousands of new workers doing the same.

So how’s the market taking the news? Very well. The Dow is up 53 and trading over 17,000. Let’s see if we can close above that important number. But remember folks, it’s just a number with no technical significance, only psychological value.

Natural gas got whacked yesterday falling 9.8¢ settling at $4.357 on a weaker cash market. The weather this week has been benign and Arthur ain’t going to help the bulls. Natty prices have dropped 55¢, 11%, in less than 3 weeks. The bulls just aren’t getting any material hot weather and production has been strong. If you’re a derivatives trader and a bull you only have one more month to get that “pop” and that is the prompt month, i.e. August. After that we’re in September and we all know A/C load begins to wane. Now to be fair to the bulls, the calendar month is July and the cash market still has the chance to get strong but each day we go without material heat in the forecast is a notch in the bear’s belt.

Today is EIA storage report day and the market is expecting an injection of 101 Bcf. If we get a 3 digit injection it will tie the record for the number of consecutive weeks we’ve had 100+ injections. This morning caution prevails with natty being down 1.3¢ on extremely light volume. Some of the other months haven’t even traded.

Oil fell yesterday with Brent really getting whacked falling $1.05 closing at $111.24. WTI got hit too but fell less, 86¢, to $104.48. Oil has fallen for 3 straight sessions. With the Ukraine matter falling from the front page to the inner pages and no more advances by ISIS the fear premium is falling just a tad. Putting pressure on prices, especially Brent, was a report the Libyan government reached a deal with rebel leaders to reopen two oil terminals. I’ve heard that one before. WTI is down 78¢ this morning.

The July 4th weekend is upon us and AAA expects more than 41 million Americans will be travelling more than 50 miles from their homes this weekend with most of them driving. Unfortunately for those motorists they’re going to find gasoline prices an average of 20¢/gallon higher than last year and at levels not seen for this time of year since 2008. OK, now for the good news being the optimist I am. Gasoline prices so far in 2014 have remained well below the spring peaks reached in each of the three previous years. The peak gasoline price this year was $3.17 on April 29th which is lower than last year’s spring peak of $3.78 and lower than price peaks in 2011 and 2012. Remember, not oil nor gold nor palladium nor rare earth elements are the most valuable commodity. Time is. Spend it wisely. Spend it with your loved ones. Have a wonderful and safe July 4th weekend.+

 

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