Equities and the Economy:

U.S. equities closed slightly lower yesterday retreating from record levels for the S&P 500 and Nasdaq. The Dow slipped 37 points to 18.496, the S&P fell 6 to 2,175 and the Nasdaq was the laggard closing down 21 points at 5,204. All in all really not that bad being we’re at record highs. The energy sector dragged down the Dow and S&P indexes on lower oil prices. The dog days of summer have set in and volume again was very low. It really is amazing that we’re at record levels though. Earnings season is just about over and even though the earnings “surprises” were to the positive side, the absolute number was that earnings shrank 3% and revenue growth was weak. Ah, but the central banks have our back.

Regarding fundamental data, the Labor Department reported in its Job Openings and Labor Turnover Survey (JOLTS) that U.S. employers posted 5.624 million job openings in June which is up from May’s 5.5 million. Hiring increased by 5.1 million and “separations” (like that antiseptic term for fired?!) were 4.9 million. This was a good report. Not a great one, but good.

This morning the Labor Department just released its weekly initial jobless claims report, and it was another good one. Initial jobless claims declined by 1,000 to a seasonally adjusted 266,000. Initial claims have now been below 300,000 for the 75th consecutive week, the longest streak since the 1970’s! The market likes the jobless claims report. The Dow is up 66 points.

Oil

Oil prices got bludgeoned yesterday with WTI losing $1.06, 2.5%, closing at $41.70 and Brent fell 93¢, 2.1%, settling at $44.05. The bears feasted on fundamental data. First, the EIA reported in its weekly crude and inventories report that although gasoline supplies fell 2.8 million barrels and above expectations, crude inventories climbed 1.1 million barrels counter to expectations of a drop of 1.4 million barrels. Second, and this was gasoline on the fire, Saudi Arabia released its latest production data showing output hit a record high at 10.67 million bpd last month vs. 10.55 million bpd in June. The kingdom has no intention of giving up its market share to anyone, especially Iran. Concerns have resurfaced again about there being a global oil glut.

Here’s an interesting one for you. Chesapeake Energy, the E&P company one time headed by the flamboyant Mr. Aubrey McClendon and for a time considered the vanguard of the natural gas shale rush, has chosen to abandon its properties in the Barnett shale formation. Technically, they didn’t abandon them. They gave them away, to Saddle Operations, LLC. Chesapeake received nothing in the sale, but did walk away from its liabilities. The Barnett shale in the Dallas-Fort Worth area was the first shale play to be exploited, and is now one of, if not the, most expensive formations in the U.S. to produce. Boy, do times change.

This morning WTI is bouncing a bit up 65¢.

Courtesy of MDA Information Systems LLC

Natural Gas

The bears were out in force not only in the oil patch but also natural gas. The September Nymex contract closed down 5.4¢, 2%, at $2.561 and at levels last seen early/mid-June and breaking technical support which brought in more sellers. The weather forecast is supportive with above normal temperatures but the bears have really hung their hat on the fact that 1) September with its lower demand requirements is right around the corner and 2) natural gas production has increased the last couple of weeks by ½ Bcf/d. That may not seem like much but storage levels are already at record highs. Speaking of storage, it’s Thursday which means we see the EIA’s storage report. The market is looking for a 25 Bcf injection, which if materializes, continues the trend of materially below average weekly injections. This morning it’s all quiet on the natural gas front with natty flat to yesterday’s close.

Elsewhere

A milestone in the housing market was hit yesterday. The newswires reported that San Jose is the first ever U.S city where the median price of a home is $1 million. San Francisco came in second at $855,000 with Anaheim third at $742,000. I surmise that all these homeowners work for Google or Apple.