Equities and the Economy:

• Trump threatens to shut down government if Congress doesn’t fund Mexico border wall.
• Stocks retreat.

Investors turned cautious yesterday after President Trump stated at a rally in Phoenix Tuesday evening that he would be willing to not raise the debt ceiling, i.e., shut down the government, if Congress didn’t fund the wall he wants to build on the U.S.’ southern border. This is an attempt to fulfill a campaign pledge. Yesterday the Dow fell 88 points to end at 21,812, the S&P 500 lost 8 to 2,444 and the Nasdaq dropped 19 to 6,278. I’m not putting a lot of stock in this move down. I’ve been talking about how trading volume has been anemic this August, and yesterday’s volume was the lowest of the year! It seems that currently everyone is content with the positions they have on, not willing to put new money in the market, but not wanting to be out. Every time someone has taken money out of this market they’ve been left behind in what has turned out to be one of the longest bull runs in history. From a trading perspective, new money won’t come in until the previous highs, which are now resistance, are pushed through.

Regarding fundamental news, Markit PMI (purchasing manager’s index) came in better than expected at 56.0 compared to last month’s 54.2 and above expectations of 54.3 so this was a really impressive report. The index rose on the strength of the “services” component. New Homes Sales were also released and were somewhat disappointing falling quite sharply to 571,000 from the previous report’s 630,000 and to a 7 month low. Disconcertingly, the number was below the most pessimistic forecast. The supply of new homes rose, as well the price which increased to $313,000, up 6.3% from a year ago.

All eyes will be on the central bank symposium in Jackson Hole, WY which begins today and ends Saturday. The highlight will be on Friday when both Fed Chairperson Janet Yellen and ECB President Mario Draghi speak with investors hoping to get hints on future monetary policy for both institutions.

European equities are stronger this morning on economic data out of France showing manufacturing confidence increased in August to highest levels since late 2007 which is pulling up U.S. equities The Dow is up 56 points.

Oil

• U.S. oil inventories decline for 8th consecutive week.
• U.S. production at highest level since July 2015.

The DOE released its weekly crude and products inventory report which showed U.S. crude stocks fell 3.3 million barrels last week and coming in close to forecast. Inventories are down 30 million barrels this year and down 70 million barrels from the peak in late March. The report also showed that U.S. production edged up by 26,000 bpd to 9.528 million bpd which is a level not seen since the week of July 17, 2015. The report provided some slight support to oil with WTI closing 58¢ higher at $48.41 and Brent rising 70¢ to $52.57.

Traders will be keeping an eye on the Gulf of Mexico and Tropical Storm Harvey which is forecast to become a category 1 hurricane Friday night before making landfall near Corpus Christ, TX. Anadarko, ExxonMobil and Shell announced they were scaling back oil and gas production in the region as a precautionary measure. Traders don’t seem to believe the storm will have much, if any, effect on the market for WTI is down 20¢ this morning.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices end little changed.
• EIA storage report today.

It was a quiet day in the natural gas market yesterday with the September Nymex contract closing down 1.1¢ at $2.928. Yawn. Today the EIA releases its always much anticipated storage report. Traders are looking for a 45 Bcf injection. If that is the number it will be the 6th out of the last 7 weeks where the injection is less than the 5 year average.

The weather forecast is little changed with no above normal temperatures forecast for the next couple of weeks in the eastern U.S. Harvey is creating a very bearish short term forecast (1-5 day) for the eastern U.S. but traders are focusing more on the anemic storage injections we’ve been having as well as some gas getting curtailed in the Gulf. Natty is up 2.5¢.

Elsewhere

Someone in Chicopee, Massachusetts, which is 90 miles west of Boston, is waking up very, very, very, very happy this morning! He or she would be the person in possession of the $758.7 million Powerball winning ticket! The cash option, which nearly everyone takes, is worth $443.3 million. Yesterday’s jackpot was the second largest in history and the largest amount ever one by a single ticket. Powerball is played in 44 states plus Washington, D.C., Puerto Rico and the U.S. Virgin Islands. The odds of matching all 6 numbers is 292.2 million to one. I’m in that former number.