Equities and the Economy:

• A second quiet day on Wall Street.
• Nasdaq posts another record high.

It was a tepid day for U.S. equities yesterday but the Nasdaq outperformed closing up 24 points, 0.4%, at a new record high of 6,049. The technology-heavy index has been on a tear! It’s up a huge 12.4% for 2017. This compares to the S&P 500 which is up “only” 6.7% for 2017. Yesterday the S&P added a single digit to 2,389 and the Dow gained 6 points to 20,981. The Nasdaq’s gains have been fueled by the tech heavyweights Facebook, Apple, Amazon and Microsoft.

Turning to the economic data, the Labor Department released its regular first time unemployment claims and while they did come in higher than expectations rising 24,000 to 257,000 last week, claims remain at historic lows. The National Association of Realtors reported its index of pending home sales fell 0.8% to 111.4 in March. But if you’re a homeowner don’t wince. It’s supply that’s the constraint. Per the NAR economist “Sellers are in the driver’s seat this spring…”

This morning a big data point was released, Q1 2017 GDP, and it was disappointing coming in at just 0.7% on an annualized basis. This is the weakest growth in 3 years. Economists were looking for a 0.9% rise. The decline mostly stemmed from the smallest increase in consumer spending since the end of 2009, largely reflecting fewer car sales. Many economists believe this may just be a temporary blip. The consumer is “healthy” amid strong stock market gains, a strong labor marker, gradually rising wages and high consumer confidence.

The Q1 GDP is not getting a welcome reception. The Dow is down 34.

Oil

• Oil prices fall on word of Libyan production returning.
• Seeing some short covering this morning.

WTI and Brent prices fell yesterday with the U.S. benchmark falling 65¢ closing at $48.97 and the European/world index slipping 38¢ to $51.44. Oil came under pressure with the Chairman of the Libyan National Oil Company announcing that the Sharara and smaller El Feel oil fields are returning to production which shall add 300,000 bpd to global supplies. He added he expects the country’s production to rise from 800,000 bpd to 1.1 million bpd by August.

Bullishly, OPEC’s Secretary General Mr. Mohammed Barkindo said there is every indication the production cut agreement will be extended for the second half of 2017. But then again, what else can he say??? OPEC meets May 25th

This morning WTI is up 46¢. Looks like short covering ahead of a long holiday weekend. Not for us, but for most of the rest of the world: May 1st Labor Day.

Courtesy of MDA Information Systems LLC

Natural Gas

• June contract slips 3.2¢.
• EIA storage report comes in at expectations.

The June natural gas Nymex contract spent its first day as the prompt month posting a minor loss of 3.2¢ closing at $3.239. After hitting a one month low early this week natty has rallied hard gaining 25¢, 8%. The reason, production. All eyes are on U.S. production. More specifically, why production is down 3% y-o-y with an 80% increase in the natural gas rig count since last May. I’m sure a big part of it is the fact the average shale gas well’s production declines 50% in the first year, but the bottom line is the bears are going to need more rigs/more production to push prices lower. There are two facts helping them though. First, with the higher y-o-y natural gas prices, coal has captured more market share. During the ’16-’17 winter 2.1 Bcf/d less natural gas was burned than in ’16. And this past winter was slightly colder! Second, as in any commodity, the higher prices go, the more production there is. The higher prices, especially the strength I’ve seen in the 2018 through 2020 calendar strips, will get producers contracting more rigs.

The EIA released its weekly storage report coming in right at expectations of an injection of 74 BCF. Inventories are currently 14% below last year and 16% above the 5 year average.

This morning June is taking back what it lost yesterday being up 3.9¢.

Elsewhere

Back in 2015, Marcus Cook weighed 489 lbs., drank seven Sprites a day and ate anything and everything. Then one day he had a brush with mortality. His close business mentor was diagnosed with cancer and dying from an incurable disease. He looked in the mirror and saw that he was dying because of choice and said “Enough is enough. I’ve got to do something.” The first thing he did was have surgery and which loped off 100 pounds, and then proceeded to lose another 156 lbs. in just 1 ½ years! The 5 ft. 8 in. man whittled his frame from 72.0% body fat to a far more reasonable 33.4%. He did it by changing his diet, and a whole lot of miles logged swimming, biking and running. All the hard work paid off. On January 15th the 44 year old Houstonian realized his boyhood dream of finishing the Houston Chevron Marathon. 2 ½ months later, April 2nd, he finished the Galveston Half-Ironman. If that wasn’t enough, just this past Saturday he completed the full Texas Ironman, a 2.4 miles swim, a 112 mile bike ride and a full 26.2 mile marathon! His good habits spread to his family. His son was 80 lbs. overweight but Marcus’ losing weight inspired him and he’s lost that 80 lbs. Three cheers for Marcus!!!