Equities and the Economy

Good morning and happy Shrimp Scampi Day. In another choppy day U.S. stocks closed mixed with the Dow gaining 72 points and the S&P 500 climbing 6 to 2,11. It would have been a trifecta of green except the Nasdaq lost 5 to 5,055. Twitter was a big anchor on the tech heavy index after the company released earnings. It was so bad that trading was halted on the stock after it fell 5.5%. When it reopened the first trade was 20% lower than Monday’s close and it ended the day down 18.18%. That’s beyond ouch. That will kill a portfolio! Interestingly, the company beat on earnings but the miss on revenues that got sellers hitting bids.

Investors are anxious about the FOMC meeting which ends today with the post meeting communique to be released at 2 PM EDT. A wave of mostly disappointing domestic data since the previous meeting has spurred economists to downgrade their outlooks for the U.S. economy for 2015, and particularly for the first quarter. Regarding the communique, I really don’t expect much change in the language. The Fed tends to make changes in policy at meetings with post-meeting press conferences and there is not one today. There will be one after the next meeting in June.

Regarding economic data, the Conference Board reported that its index of consumer confidence fell from 101.4 in March to 95.2 in April and far below economists’ forecast of 102. This is a new four month low for the index. Standard & Poor’s/Case Shiller 20 city home price index showed yesterday that home prices rose 5% in February from a year ago and this was a positive number beating The Street’s expectation of a 4.7% increase. Sales rose while home inventory remains limited leading to bidding wars and really frustrating first time buyers. Nationwide the number of homes for sale is equal to 4.6 months. A 6 month inventory is considered a balanced market.

Overnight the Asian markets closed mixed pretty much on either side of unchanged but the European markets are getting whacked on some weak fundamental economic data. This whacking is driving U.S. equity futures materially lower with Dow futures down a material 139 points.

Oil

Oil had yet another very, very quiet day with WTI gaining 7¢ to $57.06 and Brent falling 19¢ to $64.64. Total chatter. Brent popped almost a dollar intraday on news that Iran seized a Marshal Islands flagged cargo ship travelling in international waters in the Persian Gulf. This is politically significant because the U.S. is legally responsible for the defense of the Marshall Islands so you can see where I’m going here. The word is that Iran is really targeting a U.S. flagged ship in retaliation of U.S. navy ships not allowing Iranian vessels into Yemen to support the Houthis there.

The API released is weekly crude and products report as usual after the bell yesterday with the data coming in bearish but in line with traders expectations. The aggregate build was 5.3 million barrels with the 5 year average 2.75 million barrels. You oil bears out there better be careful for although the fundamental data is continually bearish with crude inventories rising, technically the charts are looking pretty bullish.

This morning WTI is up an immaterial 8¢ as traders wait for the weekly DOE report which is released at 9:30 CDT.

Courtesy of MDA Information Systems LLC

Natural Gas

The May Nymex natural gas contract expired yesterday with little fanfare closing up 2.7¢ at $2.517. The market is well balanced right now with the electric generation sector sucking up natty on one side of the equation and ample production and mild weather on the other. Looking at the forecast, it’s going to be a beautiful weekend in the Midwest and northeast. Unfortunately, it won’t be this weekend but next. The June contract is now the prompt, or front, month and is up 2.6¢. So quiet.

Elsewhere

Northern Chinese resident Jian Feng divorced and sued his wife for $120,000 and won! The story goes that Mr. Feng was deeply in love with his beautiful wife until they had a baby girl. Feng was horrified at how ugly the baby was and demanded to know who his wife had cheated on him with because the baby resembled neither of the parents. As it turns out, his wife didn’t cheat but did gloss over the fact that she had spent $100,000 on intense plastic surgery to severely change how she looked before she met him. After his wife revealed this to him, Feng divorced and sued her claiming that she got him to marry her under false pretenses. Unbelievably, Feng won $120,000 in the case. Moral of the story – make sure your online photo is up to date.  Have a good day.