Equities and the Economy:

• Rotation into safe haven assets.
• VIX is at highest level since last November.

Equities pared material intraday losses, the Dow down as much at 146 points, to close marginally lower. The Dow finished off 7 points at 20,651, the S&P 500 fell 3 points to 2,354 and the Nasdaq lost 14 to end at 5,867. Angst is definitely growing in this market. The Fear Index, the VIX, closed at its highest level since November. Gold, a safe haven asset, is at a 5 month high. The 10 year Treasury interest rate yesterday hit its lowest yield for the year (Investors buy U.S. Treasuries as safe haven assets when wanting to reduce risk. Yields decrease as T-bill prices increase).

A combination of geopolitical events and the S&P 500 trading at 18 – 19 times forward earnings, the high end of the historical range, has got investors a tad nervous. Geopolitically, any new events of conflict in the Middle East always raises tensions. Add in North Korea and its unpredictable leader Kim Jong, described by Senator John McCain as a “crazy fat kid,” continually firing test missiles in violation of U.N. resolutions with a U.S. aircraft carrier group headed to the region and you can understand why investors might want to take some chips off the table. When asked why he called Jong that he replied, “What do you want me to call him? A crazy skinny kid.”

Turning to the economic news, the Labor Department released its Job Openings and Labor Turnover Survey, aka JOLTS Report, noting U.S. employers posted 5.743 million job openings in February which was much above consensus. Separately, the National Federation of Independent Business reported that its index of small business confidence fell to 104.7. Also in the report was that this business sector plans to increase capital expenditures. The biggest complaint: they can’t find enough qualified workers.

This morning stocks continue to remain on the defensive with the Dow down 33 points. Gold is up $3.00.

Oil

• Oil prices rise for 6th consecutive session.
• Saudi Arabia tells OPEC it wants to extend production cuts.

Oil prices closed higher for the 6th consecutive session with WTI settling 32¢ up at $53.40. Brent rose 25¢ to $56.23. A couple of bullish events occurred yesterday during the trading session. First, Saudi Arabian officials told OPEC it wants to extend the current production cuts another 6 months. Remember, Saudi Arabia is carrying the bulk of the production cuts. Second, March production data released yesterday showed Saudi Arabia produced even less than its allotted quota. The kingdom produced 9.9 million bpd, down 111,000 bpd, and below its 10.06 million bpd quota.

After the final bell the bulls got further fodder from the API stating in its weekly report that crude inventories fell last week 1.3 million barrels, nearly 3 times expectations. Additionally, gasoline inventories decreased twice expectations and distillates stocks decreased more than forecasted. Tempering that data a tad was that U.S. crude production continues to increase. Although bullish, the API data isn’t pushing prices materially higher this morning with WTI up 8¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Cash market weaker.
• Prices off 6% for last week’s two month high.

A weaker cash market pushed natural gas prices lower yesterday with the May contract closing down 8.8¢ at $3.150. Prices have receded 6% from last week’s 2 month high just below $3.350. That being said, prices rose more than 80¢/MMBtu during that two months.

We may be beginning to see the effects of the higher natural gas rig count. As I’ve mentioned, the rig count is up about 80% from its low last May but production is down ~3% y-o-y. Natural gas flows from the Permian Basin, the basin du jour currently, into the Mid-continent are at 2 year highs and have doubled since February. I’m watching to see if production in the Marcellus and Utica increase as well.

This morning natty is up 1.5¢. Chatter.

Elsewhere

$1,350 or $225 million? Which sounds better? Now I’m talking cost, not profit. I’m sure United Continental Holdings CEO Oscar Munoz would take the $1,350. Instead he got the $225 million. That’s what UAL lost in market capitalization yesterday with its stock price falling. Now of course it can’t be said the entire $225 million loss is due to the public relations nightmare United experienced by yanking its customer out of his seat, getting him bloodied and dragging him down the aisle. However, the price move down does suggest investors are weighing the implications of the carriers business amid the furor over the event. Also, probably didn’t help them that he is a doctor. Regarding the $1,350 (apparently the maximum refund amount), I’m making the leap that someone would have voluntarily given up their seat for that amount. United needed four seats and three people volunteered and received $1,000 each.

If that’s not bad enough, the video of the man, who is Asian, was the top trending item on the Chinese microblogging site Weibo and seen by millions of viewers with some users saying the passenger was discriminated against because he was Asian and others calling for a boycott of the airline. No surprise with what I’m saying next. The man now has an attorney. This is getting more expensive by the minute for United. I wonder if this will end up as a case study in a business class textbook.