Equities and the Economy:

• U.S. stocks extend big rally for second consecutive day.
• Nasdaq closes at second consecutive record high.

The party continued for a second consecutive day yesterday with the Dow gaining 232 points, 1.1%, to 20,996, the S&P 500 closing up 14, 0.6%, at 2,389 and the Nasdaq rising 42 points, 0.7%, to a new record high of 6,025. Over the last two days the Dow has posted a hefty gain of 448 points, or 2.2%. That’ll help your 401K! Although the S&P and Dow are not at record highs, they’re very close. The S&P is just 0.3% of its record high set on March 1st and the Dow is shy 0.6% set on the same date. Corporate earnings have been the driver. Investors had set high levels for corporate earnings and for the most point have not been disappointed. For example, 5 of the Dow 30 companies reported earnings yesterday and 4 of them beat forecasts.

Regarding fundamental data other than earnings, the Commerce Department surprised everyone yesterday reporting new home sales in March rose 5.8%. Wall Street was expecting sales to fall 1.4%. For Q1 2017 sales are up a big 12% compared to a year ago. Get this, the median, not the mean, sales price is $311,400! Not an insignificant amount! How does a millennial afford that?! Further on the housing market, S&P/CoreLogic Case Shiller reported their national home price index rose 5.8% in February, the largest single month-on-month increase in 3 years!

Finally, the Conference Board reported consumer confidence fell 5 points from March to April to 120. Although this was obviously a decline confidence had increased sharply over February and March and is still at strong levels.

After two very strong days stocks are trying to keep the momentum going with the Dow up 26 points. By the way, world stocks hit a record high today with European equities near 20 months highs.

Oil

• Oil snaps 6 sessions of losses.
• Shipping data shows booked volume up 10% since December.

After getting whacked for 6 consecutive sessions oil prices managed to post a marginal gain yesterday with WTI closing up 33¢ at $49.56 and Brent settling 50¢ higher at $52.10. The API released a very bearish report yesterday. The report showed crude stockpiles to have increased week-on-week by 900,000 which was counter to expectations of a decline of 700,000 barrels, however, it was the gasoline inventories that shocked the market. Gasoline stockpiles were forecasted to decline 259,000 barrels. Instead they rose by a whopping 4.4 million barrels! If that wasn’t bearish enough, shipping data from Thomson Reuters Elkon shows that 50,000 bpd have been booked for shipment on tankers this month, up more than 10% since last December. This brings into question the efficacy of OPEC’s production cuts.

Very interestingly though, despite all the bearish data WTI is up 32¢ as I write.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices eke lower yesterday, down 10% in month.
• May Nymex contract settles today.

On the May options contract expiration day the May Nymex contract closed marginally lower, 2.3¢, at $3.043. The front month price has now dropped nearly 33¢, close to 10%, in less than a month. Today the May Nymex contract expires setting the cost of gas and electricity for next month for those not hedged. I’m seeing some short covering this morning with the contract up 5.8¢. This is not really surprising considering that prices have fallen 20¢, 6%, over the past 4 trading sessions.

Being we’re in a shoulder month I haven’t much discussed the weather. Well Houston is forecasted to be within one degree of a record high today and it’s very humid out there. Summer’s coming too fast. Nooooooo!

Elsewhere

Here’s one for you. Russia’s state-owned oil company, Rosneft, might end owning a U.S. energy company based right here in Houston. It all hinges on whether or not Venezuela’s state-run oil company, Petroleos de Venezuela (PDVSA), pays back its Russian loan. In exchange for the loan, PDVSA put up a 49.9% stake in Citgo as collateral. If PDVSA can’t pay its bill on time, Rosneft will almost certainly gain control of Citgo. All Rosneft would need to do is buy a few more of PDVSA’s bonds to get over the 50% ownership threshold. Needless to say, both Republican and Democratic lawmakers are all over this. They sent a hotly worded letter to the Trump Administration warning it could be a big problem for U.S. national security if Russia gets control of Citgo. By the way, Rosneft is on the U.S. sanctions list for “violating international law and fueling the conflict in Ukraine.”