Equities and the Economy:

• Stocks close lower on Friday.
• Major indexes post second week of losses.

U.S. equities suffered another day of losses on Friday. After having been down as much as 110 points intraday, buying came in mitigating some of the damage and the Dow closed down 76 points at 21,675. The S&P 500 ended off 4 points at 2,426 and the Nasdaq finished down 5 at 6,217. Friday’s market was the 4th week of losses for the Nasdaq, its longest weekly losing streak since May 2016. While the losses were fairly small, it was the first time stocks haven’t risen the day after more than a 1% drop since Donald Trump was elected on November 8th. For the week the Dow was down 0.8%, the S&P lost 0.7% and the Nasdaq fell 0.6%. The Dow suffered its largest 2 week percentage decline since mid-September 2016. What’s going on here folks is we’re seeing some reduction of risk, profit taking, after a healthy run up triggered by investors’ concerns that President Trump may not be able push through his agenda, i.e. tax cuts.

There was only one macroeconomic report of significance released on Friday and that was the University of Michigan’s consumer confidence report stating consumer sentiment rose to 97.6 in August from 93.4 in July. This was much better than economists were forecasting at 94. A big however here is the poll was conducted before Charlottesville. The events there are sure to weigh on consumer confidence which will be seen in the next report.

This morning its very quiet with the Dow down 24 points. Chatter. Everyone must be at their eclipse party.

Oil

• Prices post big gain.
• Unit at major refinery rumored to have shutdown.

The bulls came into the marker on Friday when rumors circulated that a unit at ExxonMobil’s Baytown refinery shutdown. This is a monster refinery. The second largest in the U.S. This may have brought in other players scrambling to make up the difference raising the bid on heavy oil that is getting a bit more difficult to find. On the day WTI popped $1.42 closing at $48.51 and Brent rallied $1.69 closing at $52.72. Friday’s price mitigated what would have been a bad week for the bulls. For the week WTI fell 0.6% and Brent gained 1.2%.

Baker Hughes released its weekly rig count report noting the rig count dropped 3 last week. This is the 4th time in the last 5 weeks the rig count has dropped. Oil directed rigs fell by 5 while the natural gas rig count rose by 1. The total rig count now stands at 946. For reference, the low was 404 rigs in May 2016.

The “term structures,” i.e. price curve, look bullish. Brent is backwardated all the way to February 2019. Slowly crude has gone from bidding for storage (contango price curve) to the point where current demand is greater than supply making storage unnecessary. While WTI has not gone backwardated, the contango has narrowed sending the same general message.

This morning WTI is chattering around being down 29¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Weather continues to disappoint the bulls.
• Prices give back Thursday’s gains.

Natural gas prices gave back almost all of their 3.9¢ gain on Thursday closing down 3.6¢ on Friday at $2.893. In the summer the bulls count on hot weather, and have mostly been disappointed. Lack of any significant heat this summer has kept the lid on prices which have struggled to break though $3.00. That being said, gas consumption in the power sector has been strong despite the lack of any material heat waves which is keeping a floor on prices. Additionally, 6 of the last 7 storage reports have shown injections have been below average. So you bears better realize the downside is limited. That being said, I don’t see any big pops either (above $3.15) over the next few months. Dips will be bought and rallies will be sold.

This morning the weather forecast is downright bearish with below normal temps for the next 10 days across the Midwest and expanding to the east. But traders aren’t selling it. Natty is down 1.1¢.

Elsewhere

Well by now everyone and their brother and sister know of today’s solar eclipse. All the stores are sold out of eclipse glasses. “Totality” will occur in an arc from northern Oregon beginning around 9:04 AM PDT ending over South Carolina at around 2:47 PM EDT. That is unless you happen to be aboard a particular Royal Caribbean cruise who will see it later. Here are some interesting facts regarding solar eclipses.

• Depending on the geometry of the Sun, Moon and Earth there can be between 2 and 5 solar eclipses every year.

• Totality occurs when the Moon completely obscures the Sun so only the solar corona is showing.

• A total solar eclipse can happen every 1 to 2 years. Monday’s is unique because it’s rare to have one go all the way across the U.S.

• The longest total eclipse can last 7.5 minutes.

• The width of the path of totality is usually about 100 miles wide and can sweep across an area of the Earth’s surface 10,000 miles long.

• Almost identical eclipses occur after 18 years and 11 days. This period of 223 synodic months is called a saros.

• During a total eclipse conditions in the path of totality can change very quickly. Air temperatures drop and the immediate area becomes dark.

• Even though it’s daytime during totality you can see the major planets like Mars, Venus and Mercury.

Here’s what to expect if you plan to be outside in the totality band. You’ll see kind of a curtain of darkness in the west and then a shadow moving at very high speeds will sweep across you. It’s not like the shadow of a cloud. You’ll feel almost engulfed by darkness. You will hear birds and crickets, just as if it were dusk or nighttime. You’re viscerally aware that something strange is happening. And you might feel a sense of ominous dread, or, if you are an astronomer, a sense of elation.