Equities and the Economy

Good morning and happy National Hairball Awareness Day. U.S. equities posted modest gains yesterday but it was good enough for the Nasdaq to close at its highest level in 15 years! Whoo-hoo! The tech heavy index rose 21 points (0.4%) ending at 5,056 surpassing the 15 year high set on March 10, 2000 at 5,049 marking the dot-com era’s high-water mark. Our next targets are the intraday highs of 5,079 and 5,133 both also reached in March 2000. The good news is that valuations are only slightly elevated from the five year average. The Nasdaq Composite is trading at 30 times earnings vs. an average of 27.8 during the past 5 years. In March 2000 the multiple was a nose bleeding 190!

The Dow added a mundane 20 points (0.1%) closing at 18,059 and the S&P 500 added 5 (0.2%) to 2,113 with the latter retreating from an intraday record of 2,121. As the song goes, we need to get these two indexes to “Break on through to the other side.”

Regarding fundamental data, the major report here in the states yesterday was the Commerce Department reporting new home sales for March which were down 11% to an annualized rate of 481,000 and a rather sizeable miss from the consensus of 520,000. The illness of March’s data was mitigated marginally in that February sales were revised upward by 4,000 units. Yesterday we also saw Markit’s preliminary report on the manufacturing managers index for April showing a drop to 54.2 from 55.7 in March. So the fundamental data was bearish but higher oil prices (more on that below) and a weakening U.S. dollar, which retreated from a 9 year high vs. the euro, boosted investor confidence.

This morning the Dow is down 30 and S&P flat to yesterday’s close but it appears investors and traders are playing a momentum and technical game with the Nasdaq being it’s up 31 this morning. I say “technical” because the Nasdaq has broken through resistance which always brings in buying. Asian markets closed mixed and the European markets are trading the same.

Oil

Oil rallied yesterday with WTI and Brent settling at their highest levels of the year with the former rising $1.58 (2.8%) to $57.74 and the latter settling up $2.12 (3.4%) at $64.85. Although U.S. crude inventories are at an 85 year high and crude production is near a 40 year high traders are keying in on the DOE’s data noting in their last two weekly reports U.S. crude production is falling. WTI, and all U.S. dollar priced commodities, got support from the retreating U.S. dollar. The fear premium for Brent is increasing which is pushing Brent prices up with Saudi Arabia renewing airstrikes against the Houthis in Yemen only a day after they said they were ending their air campaign. And for you technicians out there, the WTI chart looks bullish.

Traders may be taking profits ahead of the weekend with WTI down 91¢ this morning.

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA reported in its always much anticipated weekly natural gas storage report that 90 Bcf was injected into U.S. storage fields last week which was 2 Bcf more than the all-important expectation. Although only a marginal miss traders wailed on natty with the May contract closing 7.5¢ lower at $2.531. Being its spring the cash market isn’t giving the bulls any love especially with nuclear plant maintenance/refueling at levels below the 5 year average. As prices fall more and more coal fired generation will be displaced by nat gas.

After the cold snap you folks in the upper Midwest and northeast are currently experiencing temperatures will modify and then in the first week of May you are going to have some fantastic weather! Spring will have finally sprung!

This morning natty the May contract is up 2.4¢ but its apparent traders are still drinking their coffee for most of the other months haven’t even traded.

Elsewhere

Our “Beam me up Scotty” friend has the solution to California’s drought problem. William Shatner is proposing that a pipeline be built form the Pacific Northwest “say Seattle,” to California. He’s estimated the cost of the pipeline at $30 billion and tweeted asking “experts” Al Gore and Elon Musk to “weigh in and join the conversation.” He proposed the 4 foot pipeline be built above ground “because if it leaks, you’re irrigating!” As his dearly departed co-star might had said, “That is highly illogical.” Have a good weekend, and live long and prosper.