Equities and the Economy

Good morning and happy National Bugs Bunny Day. Well the market was asking “What’s up doc?” yesterday or more appropriately, what’s up with these markets with the Dow falling 74 points ending at 18,036, the S&P 500 closing down 8 at 2,107 and the Nasdaq off 31 to 5,024. Although the focus of this week was on the FOMC meeting, which ended yesterday with the post meeting communique issued, it was the Commerce Department’s report that the economy grew at a barely discernible 0.2% in Q1 and way less than the 1% economists were forecasting that brought in the selling. Q1 GDP was the poorest showing in a year and down from the 2.2% growth in Q4 2014. A lot of folks are pointing to the harsh weather in Q1, plunging exports due to the dollar’s strength and cutbacks in the oil sector. Regarding the weather in Q1, you may not be aware but the infamous Polar Vortex (PV) that hit the U.S. in January 2014 also hit in February 2015. Temperatures in February ’15 were only about 3 degrees warmer than January 2014. Also, instead of being centered over the Indiana area as it was in ’14, the PV was centered a bit further east over Ohio in ’15. Interestingly, the PV in 2014 was endlessly reported in the media but was barely mentioned in 2015.

Returning to the FOMC meeting and with no post meeting press conference, and as I anticipated, the Fed took no action reiterating it is “data driven.” So we are left where we were previously, believing the Fed will raise interest rates before the year end but with yesterday’s GDP number, certainly not before the summer and likely not before the autumn.

In other economic news, The National Association of Realtors (NAR) reported that its index of pending home sales rose 1.1% in March to 108.6 with the consensus going into the number of 1.0% so we’ll call that a bull’s eye. The NAR noted the index has risen a stout 11.1% year-on-year.

This morning Asian markets all closed lower with Japan’s Nikkei really taking a hit down 2.69%. The European markets are bouncing back from their annihilation yesterday when the three major indexes averaged a loss of 2.33% trading up an average of 0.63%. Unfortunately, stocks here in the states are extending their losses from yesterday with Dow futures down 38. Let’s see (hope!) if we can recover the losses by the end of the day.

Oil

The DOE released its weekly crude and products report yesterday and while inventories rose a bit more than historically (3.2 million barrels on an aggregate basis vs. a five year average of 2.75 million) the build came in less than traders anticipated getting their queue Tuesday night from the API’s report which showed a build of 5.3 million barrels. Traders took the data as bullish and bought the heck out of futures and at day’s end WTI closed up $1.52 (2.5%) at $58.58 and at the highest level in 2015. Brent also rose, albeit less, $1.20 to $65.84. Traders also keyed in on the fact that although crude inventories rose 1.19 million barrels, inventories at Cushing fell 500,000 barrels which was the first decline at Cushing since last summer. Also, oil is getting support from the U.S. dollar which is at its weakest level in a week. And don’t forget my comment yesterday: the WTI chart is bullish.

This morning WTI is up 8¢. Chatter.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas rallied yesterday, if you want to call 6.9¢ a rally!, on the release of the 30/60 day forecast showing above normal temperatures in the upper Midwest and northeast for May. Being it’s May with the aboves in the north this will not add very many cooling degree days. I interpret it as these regions having great weather in May!

Today is “all exciting Thursday” with the EIA releasing its weekly natural gas storage report at 9:30 CDT. Expectations are for an injection of 92 Bcf. Last year we saw an injection of 77 Bcf with the five year average an injection of 55 Bcf.

Ahead of the report this morning natty is slipping 3.8¢ on very light trading as natty traders drink their Maalox.

Elsewhere

Referencing the first sentence of today’s report, it was the now deceased Mel Blanc who was the voice of Bugs Bunny. Mr. Blanc was also the voice of Daffy Duck, Porky Pig, Tweety Bird, Sylvester the Cat, Yosemite Sam, Fog Leghorn, Marvin the Martian, Pepe Le Pew, Speedy Gonzales, Wile E. Coyote, the Tasmanian Devil, Barney Rubble, Mr. Spacely and well as the original voice of Woody Woodpecker. Mr. Blanc is regarded as one of the most influential people in the voice acting industry earning the nickname “The Man of a Thousand Voices.” Little known is that after graduating high school he began leading an orchestra becoming the youngest conductor in the country at the age of 19. Have a good day.