Equities and the economy

No other way to put it. Yesterday was a lousy day for stocks. The Dow closed down 174 points, 0.98%, at 17,542, the S&P 500 lost 35, 1.2%, ending at 2,042 and the Nasdaq ended at 4,848, off 72 points, 1.47%. The S&P posted its biggest daily percentage loss in six weeks and the bellwether index once again is negative for the year, 0.1%. As I mentioned a couple times this week, the equity markets have had a very nice and strong rally since the low in mid-February with the S&P close to its all-time high (3%) and “bull fatigue” was setting in. New buying just wasn’t coming in. Investors are taking their cue from the Japanese yen and gold prices, which are safe haven assets, noting their strength, the yen is at a 18 month high vs. the U.S. dollar (very much to the chagrin of Japanese officials), and are pausing on their buying. The good news is this market has been very resilient (thank you Fed, ECB and BOJ!) and has done a good job of weathering the negative impact of the dollar. No pullback in the last two months has exceeded 3% before buying has emerged. And that may be the case for the Dow is up a big 130 points this morning working on capturing back all its losses and following European equities higher with the latter trading between 0.80% and 1.26% higher on better than expected German export data.

The U.S. economy looks pretty healthy and further evidence of that was yesterday’s weekly jobless claims which fell last week by 9,000 to 267,000. Unemployment claims have been bottoming out recently after peaking in March 2009 which coincides with other employment data showing a pretty darn healthy labor market If the Fed could just get their 2% inflation they’d be real happy. I can tell you that even when they do they’re not going to raise interest rates immediately. They want to make sure the economy is on stable footing. They’d rather error on the side of letting inflation run a little than tightening monetary policy too early and pushing the economy into contraction. It’s a “buy dip” mode folks with central banks the wind at your back!

By the way, Q1 earnings season reporting begins next week which will be the next significant event impacting equities.

Oil

Oil prices closed marginally lower yesterday with WTI off 49¢ settling at $37.26 and Brent down 41¢ closing at $39.43. Chatter. If you have to point at something I’ll “blame” a report yesterday stating Iraq’s production has increased. How about that production freeze, eh?! By the way, the big meeting is a week from Sunday, April 17th.

Venezuela is in bad shape. Chavez’s and his successor’s, Maduro, communist policies have crippled the economy there but they “got away with it” with oil prices above $70 but with prices at $37 its crushing them. The government has frozen prices leading to shortages from milk to diapers. Here’s how bad it’s gotten. Yesterday Venezuelan President Nicolas Maduro decreed all Fridays in April and May to be holidays for public workers. The reason: not enough electricity! He stated “We’re going to have long weekend to, (are you ready) not affect production!” Seriously?! He’s called on large electricity consumers, such as malls and manufacturing companies, to generate 20% of their own electricity. That ain’t gonna happen overnight!

Oh, and don’t forget that Venezuela is the most hawkish OPEC nation who, by the way, is leading the push for the OPEC production freeze and who has never, and will never, curtail one drop of oil. I feel for the people of that country.

This morning oil is rallying big time being up a big $2.35. We’re getting a nice pop off stronger global equities. Of note to me the contango in the oil price curve has narrowed materially. This means crude is bidding less aggressively for storage. The enormous carry that existed months ago is all but gone. Something is changing in the supply/demand equation. My antennae are raised.

Natural Gas

Natural gas prices skyrocketed yesterday with the May Nymex contract settling 10.7¢ higher at $2.018 and within a nickel of this week’s 1 ½ week high. Lingering cold weather across the major gas consuming regions of the nature is supporting the market along with forecasts for a hot summer and flat to declining natural gas production. Lower 48 production is currently at 73.5 Bcf/d which is down from February’s peak of 74.7 Bcf/d, and no one is expecting production to rise. It will stay flat at best.

Prices rose yesterday despite a marginally bearish weekly EIA storage report. The agency reported a 12 Bcf injection with the market expecting a 9 Bcf injection. Storage levels are a whopping 1,008 Bcf, 69%, greater than last year and 874 Bcf, 54%, above the 5 year average. Storage levels are so high because we just came off the warmest winter on record! Just imagine where prices would be if we’d had a normal winter and storage levels were lower!

This morning natty is down less than a penny trading $2.010. Chatter.

Courtesy of MDA Information Systems LLC

Elsewhere

It’s Masters time! A tradition unlike any other! Yesterday marked the 80th start of golf’s most revered tournament. This year for the first time fans can watch the entire event streamed live, and in 4K quality. Additionally, the first six hours of play, viewed through the new Masters app, can only be viewed by streaming for it’s not on TV! That’s not the only way the Masters has gone high tech.

• Although the Masters app was released in 2010, this year you can track individual players. When you open the app you can immediately see where your favorite players are on the course and the leaderboard.

• The app, which is powered by IBM, launched the app on wearables like the Apple Watch and Android Wear for the first time.

• Last month the PGA Tour announced a new deal with GoPro. GoPros’ fisheye-view HERO cameras will now appear at PGA Tour tournaments.

• Much of the GoPro video will be fed into videos at Skratch TV, the online video network launched by the PGA Tour.

• Part of the experience will use IBM’s smart computing system, Watson. Watson will produce insights on swings, strokes and shots plus analyze social media trends, all live on the scene from the Masters.

Here’s some fun trivia about the Masters:

Bob Jones and Clifford Roberts organized the first event, later named the Masters Tournament, at Augusta National in 1934.

The Masters Tournament was called the “Augusta National Invitational” for the first five years (1934-1938).

The first tournament was held March, 22 1934. Since 1940 however, the Masters was scheduled for the first full week (Sunday – Sunday) in April each year.

Horton Smith won the first tournament in 1934.

Each hole is named after a plant or shrub. For example, No. 3 is called “Flowering Crab Apple.”

In 1949, the first Green Jacket was awarded to that year’s Masters champion, Sam Snead

Amen Corner refers to holes No. 11, 12 and 13. In 1958, a Sports Illustrated writer, Herbert Warren Wind, named the second half of hole No. 11, hole No. 12 and the first half of hole No. 13 Amen Corner. This is where the critical action took place that year. He borrowed the name from an old jazz recording called “Shouting at Amen Corner”

Rae’s Creek was named after John Rae. The creek runs in front of the No. 12 green, has a tributary at the No. 13 tee, and passes by the back of the No. 11 green. Rae’s house kept residents safe during Indian attacks. It was the furthest fortress up the Savannah River from Fort Augusta.

You cannot apply for membership. You can only be invited.

The golf course is closed from late May until mid-October