Equities and Economy

Good morning. As we all know, today is tax filing deadline day. Well it’s also National Take a Wild Guess Day! Think there’s a correlation?! By the way, on this day 103 years ago the Titanic sunk. Hope that’s not an omen for stocks! U.S equities closed mixed with the Dow and S&P 500 eking out small gains of 60 points to 18,037 and 3 to 2,095, respectively. The Dow’s gain may have been fairly sedate but note it did put us back over 18,000. The Nasdaq was the laggard closing down 11 to 4,977. The Dow and S&P got a boost from energy company stocks with crude oil prices rising. The top 10 performers in the S&P were energy companies with each rising more than 2%. As I mentioned yesterday, J.P. Morgan Chase and Wells Fargo reported earnings with the former beating analysts’ expectations but the latter’s Q1 profit fell which was Well’s first drop in profits in 18 quarters. As I also mentioned yesterday, the strong U.S. dollar is adversely affecting multi-national corporations. Example, Johnson & Johnson reported an 8.6% drop in Q1 profits stating the dollar’s strength was partly responsible for decline.

There was a cornucopia of fundamental data released yesterday. The Commerce Department reported retail sales rose 0.9% in March which is the largest amount of the year rebounding after three straight months of declines. Unfortunately, the rise was less than analysts forecast of 1.1%. This latest data seems to reinforce many economists belief the economy is slowing a little. The retail sales report follows a jobs report released earlier this month showed that hiring had slowed dramatically in March.

Per the Labor Department, U.S. producer prices rose to a seasonally adjusted 0.2% in March after 4 straight monthly declines, primarily driven by falling oil prices, and in line with expectations. On a disconcerting note, the NFIB small-business index for March fell to its lowest reading in 9 months.

Overnight the Asian markets closed mixed and currently all the major European indexes are trading moderately higher which is supporting the U.S. market with Dow futures up 69 points. Investors will have a lot to keep an eye on today for there will be a raft of economic data, a trio of Federal Reserve speakers and a strong lineup of earnings announcements. What fun!

Oil

Oil continues to recover from its low of around $42 seen in mid-March with WTI yesterday closing up a very material $1.38 at $53.29. Brent added less, 50¢, settling $58.43. Yesterday’s WTI settle was its highest since April 7th and marked a 4th consecutive higher close. Iran’s oil minister on Tuesday called on OPEC to reduce production by 5% to boost prices but I believe two other factors are currently at work supporting prices. First, the U.S. dollar fell vs. the euro yesterday on the aforementioned weak retail sales data but, and second, the real data traders are focusing on is the EIA report this week that oil producion from the seven shale regions in the U.S. is expected to fall by 57,000 barrels a day in May from April. That’s what will happen when the rig count drops 50%.

However, don’t expect a big jump in price. U.S. drillers are building a backlog of drilled wells they plan to frack and bring on line as soon as prices rebound. Wood Mackenzie Ltd estimates there are 3,000 wells drilled and ready to be fracked. Before the price collapse the generally accepted breakeven price a producer needed to drill was around $70/barrel. That maybe now down at $60 to $65 per barrel with falling service costs (down at least 20%), hedging opportunities (the futures curve is in steep contango) and plenty of capital on the sidelines available for investment. This morning WTI continues its rise being up 82¢.

Courtesy of MDA Information Services LLC

Natural Gas

Natural gas prices have been stabilizing since trading near a three year low below $2.50 earlier this week on an intraday basis. Front month natty prices have fallen more than 55¢, 19%, over the past couple of months. Yesterday the May contract settled up 1.9¢ at $2.530. Chatter. This morning natty is up 3.2¢ getting a little boost from the weather forecast this morning which is showing a shift to some cooler temperatures in the 6-10 and 11-15 day time periods in the eastern U.S. which will cause some furnaces to click on. But let’s not miss the forest through the trees, natty is cheap right now.

Elsewhere

With it being tax day I thought you might want to know where your hard earned money is being spent

Source:  nationalpriorities.org