Equities and the Economy

Good morning and happy National Cheeseball Day. U.S. equities ended very slightly lower yesterday than Wednesday with the Dow off 7 to 18,106, the S&P 500 down 2 to 2,105 and the Nasdaq ending 3 lower to 5,008. The Dow was up 57 points at one time during the day but couldn’t hold on to the gains. Investors had a couple of important pieces of economic data to get through as well as some earnings reports. Regarding the former, weekly jobless claims came out stating that claims rose 12,000 last week, the highest level in 6 weeks. However the more important four week moving average remained unchanged. Housing starts rose to an annual rate of 926,000 in March but was well below analysts’ expectations of 1.04 million. Both reports were disappointing. On the bright side the Fed’s Philadelphia manufacturing index rose to 7.5 in April and much better than the market was looking for which was 6.

Corporate earnings were generally upbeat with Goldman Sachs, Citigroup, UnitedHealth Care and Walt Disney all coming in better than Wall Street was expecting. So you can see why stocks closed almost unchanged. There was the good and the bad. .

All that was missing yesterday was the ugly, and unfortunately we’re getting it in spades this morning with the Dow down a whopping and painful 224 (1.29%) points. Ouch! The Asian markets closed mixed although Japan’s Nikkei got hit 1.17% and the European markets which are getting destroyed with Germany’s DAX leading the way down off a huge 2.23%. The driver of this big selloff is the Chinese government move today announcing a regulatory clampdown on trading, a move that is negative for the recent and large flow of money into Chinese exchanges. The key elements of the change were the government’s lifting of restrictions on short selling and banning a type of financing called umbrella trusts which provides cash for margin trading. This move by the Chinese government is being interpreted as an attempt to cool off the market there. I’m not sure you’re aware of this but China’s Shanghai Composite Index is up a whopping 33% so far this year. Now you see why I report on the international markets. What goes on there indeed very much impacts your portfolio even if you’re only invested in domestic equities.

Oil

What can one say about the move in oil prices other than “impressive!?” Over the last 6 sessions WTI prices have gained more than 12%. Yesterday’s move up, which was minimal of a 32¢ gain of WTI closing at $56.71 and Brent rising 66¢ to $63.98, was driven by the DOE’s weekly crude and products report which although showing a rise in inventories, came in much less than traders’ expectations. Also supporting crude, as well as all commodities priced in U.S. dollars, was the greenback’s fall vs. the euro. Yesterday’s down move of the dollar was the largest decline in 2 weeks.

Equities may be getting pummeled but it’s not spilling over to oil with WTI down a meaningless 4¢.

Natural Gas

The EIA reported yesterday that 63 Bcf was injected into storage last week which was 5 Bcf more than the market was expecting and seemingly bearish and the market did immediately sell off but buyers came in on the dip pushing natty higher and at the end of the day the May contract closed up 7.4¢ at $2.684. A surprisingly strong close for such a bearish storage number. We have 692 Bcf more than we did at this time last year (remember the Polar Vortex?!) but we’re still 145 Bcf lower than the 5 year average.

Courtesy of MDA Information Systems

The jet stream remains stable with below normal temperatures forecasted for the 6-15 day time frame in the eastern half of the nation which is somewhat moot for the end of the 15 day period puts us into May which is when A/C load starts picking up. Like I said previously, if the jet stream pattern remains as it is now for a few months it’ll be bearish of natty. This morning is quite quiet with natty being down 2.4¢

Elsewhere

Being yesterday was tax day I thought I’d convey a fact I bet you didn’t know (I didn’t!) that I discovered while doing my usual research. It is a fact that is disturbing to me. Did you know that for 2015 Americans will pay more on local, state and Federal taxes than they shall spend on housing, food and clothing! The former aggregate expenditure is $4.8 trillion. The latter $4.4 trillion. Have a good weekend.