Equities and the Economy:

• Stocks end little changed.
• July Retail sales strong.

U.S. stocks ended little changed yesterday with the Dow closing up 5 points at 21,999, the S&P 500 falling a single digit to 2,465 and the Nasdaq dropping 7 to 6,333. Pure chatter evidenced by the fact the trading volume yesterday of 5.3 billion shares was among the lowest of the year. The Commerce Department reported retail sales rose a very strong 0.6% in July marking the single biggest m-o-m gain for the year. Additionally positive, June’s sales were revised upward. July’s gain was fueled by a surge in auto sales. Other good news came in the form of the National Association of Homebuilders report showing its index of homebuilders sentiment rose from 64 to 68 in August from July. This bodes well for future sales of new homes, and draperies, carpets and furniture. So why didn’t investors jump on the positive data? Because some companies stock prices fell after they released earnings. Home Depot, which is member of the Dow, stock fell 2.7% weighing on the index. This is just one example. There were others.

This morning equities are trying to rally with the Dow up 49 points. The big report today will be the release of the minutes from the FOMC’s July meeting with investors parsing it for insight into the Fed’s direction on monetary policy.

Oil

• Oil prices consolidating.
• API report mixed.

Oil prices closed flat to Monday with WTI off 4¢ settling at $47.56 and Brent up 7¢ closing at $50.80. WTI prices have consolidated the last couple months trading between $45 and $50. Traders looked to API’s report yesterday, which is always released after the closing bell, for direction but really didn’t get any. On the bullish side, crude inventories fell last week by a big 9.2 million barrels, nearly 3 times the forecast of 3.4 million barrels. On the bearish side, gasoline inventories rose by 300,000 barrels with forecasts of a drop of 600,000 barrels. One thing’s apparent, refiners are working overtime, which they’ve been doing all summer. There’s a rash of other data, which I’ll spare you, which is both bullish and bearish and offset each other. we’re going to need something major to materially move this market, like a geopolitical event or a collapse of the OPEC production cut agreement.

One point. You regular readers know I always follow the “price term structures,” i.e., the price spreads between the front and deferred futures contracts. Of late both the WTI’s and Brent’s front month price has increased relative to the deferred months. In Brent’s case the September contract is “backwardated” out to March 2018. That means the Brent September 2017 price is greater than every month until March 2018. This is a bullish indicator because it means that current demand is greater than current supply and to the point oil does not need to be stored.

Traders will be looking at today’s DOE crude and products inventory report for direction. This morning there’s no direction with WTI up 17¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices meandering.
• Weather forecast supportive.

Natural gas prices have been drifting roughly between $2.80 and $3.00 for the last month or so primarily driven by the weather forecasts. If the forecast shows below normal temperatures for the Midwest and East, prices drop, and vice versa. Prices of late have rebounded back to just below $3.00 as forecasts have shown a return to above normal temps in those regions. But it hasn’t been enough to take prices over $3.00. And pretty soon we’re going to be in September with average U.S. temps beginning to wane. Yesterday the September contract slipped 2.4¢ closing at $2.935. The calendar strips moved a penny. Chatter.

This morning the forecast has shifted a tad cooler and the bears are out with natty down 4.2¢. However, as prices are pushed lower support comes in as electric generators burn more gas. The movement in consumption and price of natural gas is a beautiful example of price elasticity.

Elsewhere

The largest windfarm in America is under construction in Oklahoma. The $4.5 million dollar, 2 gigawatt Wind Catcher project is being built in Oklahoma’s panhandle and will provide electricity to 1.1 million customers. That’s a lot of wind electricity in the middle of the boonies so American Electric Power is asking regulators to approve plans to build a dedicated 350 mile transmission line to Tulsa. GE will provide 800, 2.5 MW turbines for the project. The developer, Invenergy LLC, is touting that the project will provide 4,000 direct jobs during construction and 80 permanent jobs.