Equities and the Economy:
Excellent day yesterday! The Dow chalked up a gain of 118 points, 0.64%, to finish at 18,614, the S&P 500 added a healthy 10 points, 0.47%, ending at 2,186 and the Nasdaq popped 24, 0.46%, to close at 5,228. Besides the nice gains here’s what made the day special. This is the first time since December 31, 1999 that all three major indexes finished at record levels on the same day! (“party like it’s 1999!) Regarding economic news, as I mentioned yesterday, the Labor Department reported in its weekly initial jobless claims report there were 266,000 initial claims which was pretty much at forecast but marked the 75th consecutive month claims have been below 300,000 which is the longest streak since the 1970’s. This was definitely supportive for the market. In a macro sense, and although S&P 500 P/E ratios are at frothy levels, U.S. stocks are attracting one heck of a lot of foreign money being our economy is performing the best in the world compounded by the fact that other countries’ central banks are demanding negative interest rates. If you’re a foreign investor it’s difficult not to allocate some meaningful capital to at the very least a high-quality basket of U.S. equities. For the record, the S&P 500 is priced at about 17 times expected earnings, compared to a 10 year return of 14 times expected earnings.
Other data released yesterday showed that both import and export prices inched up despite a decline in fuel costs which suggests a possible pick-up in inflation. The Fed has been looking for a return to healthy inflation, which is one of its mandates. The Fed has a target of 2% inflation but may let it run beyond that level as insurance to keep the economy growing.
Overnight the Asian markets rallied taking their cue from U.S. stocks especially Japan’s Nikkei which closed up 1.10% bringing its week gains to a big 4.1%. That being said, that’s a pretty darn volatile index. Here in the U.S. Dow futures are retreating just a bit being down 22 points and being dragged lower by the European markets which are down between 0.20% and 0.38%. 22 points is chatter.
Oil prices skyrocketed yesterday with WTI jumping $1.78, 4.3%, closing at $43.49. Brent leaped $1.99, 4.5%, settling at $46.04. Setting the stage for you, going into yesterday’s trading the oil market was egregiously oversold (as evidenced by the CFTC’s position report). Then the Saudi oil minister Khalid al-Falih stated in a transcript, not an oral statement so this carries more weight for one must assume the transcript was reviewed by those higher in the Saudi government, that if there is a need, Saudi Arabia would cooperate with other OPEC and major non-OPEC countries to rebalance the market. That comment sent the bears running for their caves and the shorts buying to cover. OPEC will be meeting informally on the sidelines of the International Energy Forum biennial conference September 26-28. Let’s see if anything concrete comes of this or it’s another Doha. Oh by the way, Iraq, OPEC’s second largest producer, just announced it had reached agreements with Shell, BP and Lukoil to restart oil field investment. Iraq hopes to boost output by 250k-350k next year. The Saudi comments continue to support oil with WTI up 47¢ this morning.
Courtesy of MDA Information Systems LLC
The EIA released its weekly storage data yesterday stating 29 Bcf was injected into storage last week. Now this was a marginally bearish number for traders were looking for 25 Bcf injection. Prices immediately fell but buyers bought the dip and at day’s end natty finished down a penny at $2.551. I think we’re seeing some profit taking at these levels. After hovering around $2.75 for weeks natural gas prices have gotten pounded the last couple of weeks falling 40¢, 13%, and were at a 9 week low. As a former trader, there’s a time to take some chips off the table. Returning to storage, levels are 361 Bcf, 12%, greater than last year and 440 Bcf, 15%, above the 5 year average. This morning and it being Friday the shorts continue to cover and natty is up 6.0¢.
Talk about old. As published in the journal Science, scientists say they caught a shark that may be 512 years old! The Greenland shark, a massive carnivore that can be more than 16 feet long, lives in the cold northern arctic waters. The shark grows very slowly, perhaps less than a centimeter a year. In fact, it grows so slowly scientists believe it doesn’t even reach sexual maturity until it reaches 150 years of age. Now there is some uncertainty associated with the age estimates but researchers believe with 95% certainty the age is between 272 years and 512 years. Even at the low end of the age estimate the Greenland shark is the longest living vertebrae animal. Just think about this, these sharks were born before the Pilgrims landed in America.