Equities and the Economy:
It was a bad day for the bulls yesterday with the Dow and S&P 500 having their worst day in a month. The Dow lost 91 points, 0.5%, finishing at 18,324, the S&P fell 14, 0.6%, ending at 2,157 and the Nasdaq dropped 47 points, 0.9%, to 5,138. The Dow has now logged seven consecutive days of losses. The S&P has fared better of late closing within 1% of its previous closes over the past 17 sessions. The media is pointing to the report yesterday that auto sales for July were lower than expected, but I think what we’re seeing is profit taking after recently hitting record highs in the Dow and S&P. The fundamental economic news was actually pretty positive for stocks yesterday, except for the auto sales data. Personal income rose 0.2% in July which was marginally below expectations of 0.3% but the number was OK. Also, inflation remains contained with the PCE, the Fed’s preferred inflation barometer, increasing to 0.9% in the 12 months ended in June, which is unchanged from May, The annual core inflation was flat at 1.6%. Interpretation: with no inflation wage pressure and annual inflation well below its target of 2%, the Fed will be in no rush to raise interest rates.
Asian stocks closed flat to down today and European stocks are somewhat on the defensive trading marginally lower which is exactly what the Dow is doing being down a meaningless 2 points.
Oil hasn’t been “defensive,” it’s been in full retreat since early June posting yet another day of losses yesterday. WTI lost 55¢ closing below $40 at $39.51 and Brent lost 34¢ settling at $41.80, both ending at new 4 month lows. Traders are focusing on a global supply “glut” and the “glut” got bigger on a report yesterday that Libya continues to ramp up production with the Libyan National Oil Company stating it wants to quadruple production. Let’s see if the tribes there don’t throw a wrench in the works. This morning WTI is getting a minor boost trading up 42¢ on the heels of a mildly bullish API report noting an aggregate draw of 0.3. Maybe more so, WTI is egregiously oversold and a bounce is due. The boat is currently listing heavily to the short side.
Courtesy of MDA Information Systems LLC
Natural gas prices leaked lower yesterday with the September contract falling 3.8¢ closing at $2.733. The more important calendar year strips settled basically unchanged to Monday’s settles. As I’ve said previously, natty has been pivoting around $2.75 for over a month. On a long term bullish note, the FERC approved the start of construction on two natural gas pipeline projects to cross the U.S. border with Mexico that will have a combined delivery capacity of nearly 2.5 Bcf/d. Both pipelines expect to begin service in late 2017.
This morning the bulls are exerting their mass with natty up 7.6¢. The cash market is pulling the futures market up.
It’s Olympics time! The opening ceremony is this Friday. Here’s a chronology of some interesting, and controversial, facts surrounding these Olympics.
September 13, 2007 – Seven cities in total make bids for the 2016 summer Olympics: Chicago, Madrid, Rio de Janeiro, Tokyo, Doha (Qatar), Baku (Azerbaijan) and Prague.
June 4, 2008 – Chicago, Tokyo, Rio de Janerio and Madrid are named the finalists.
October 2, 2009 – Rio De Janeiro is announced as the winner in Copenhagen.
October 9, 2009 – The IOC approves adding rugby and golf for the 2016 and 2020 Olympics.
June 7, 2011 – NBC and Comcast pay $4.38 billion for the rights to broadcast the Olympic games through 2020.
April 30, 2014 – Olympic Vice President John Coates makes a statement claiming the preparations for the Olympics in Rio are the “worst” that he has seen.
February 26, 2016 – Amid indications that the mosquito-born Zika virus is causing microcephaly in newborns, the Center for Disease Control and Prevention advises pregnant women to “consider not going” to the Olympics, The CDC later strengthens the advisory, telling pregnant women: “Do not go to the Olympics.”
March 4, 2016 – The U.S. Olympic Committee announces formation of an Infectious Disease Advisory Group to help the USOC establish “best practices regarding the migration, assessment and management of infectious disease, paying particular attention to how issues may affect athletes and staff participating in the upcoming Olympic Games.”
March 18, 2016 – As concerns are rising whether Brazil will be adequately prepared for the Olympics, the IOC states its “very closely” watching the political events unfolding there.
March 30, 2016 – With little more than four months before the start of the games, Brazil Sports Minister George Hilton resigns, Ricardo Leyser replace him on an interim basis.
March 31, 2016 (next day) – Brazil’s Justice Minister says that Colonel Adilson Moreira, the head of a group organizing security for the Olympics, has resigned..
April 21, 2016 – Greek actress Katerina Lechou lights the Olympic torch in southern Greece at the site of Ancient Olympia. The torch is then handed to its first torchbearer, gold medal winning Greek gymnast Eleftherios Petrounias, to begin its six day relay across the country.
April 21, 2016 (same day) – Hours after the Olympic torch is lit in Greece, a $12 million seaside bike path collapses in Rio, killing two people and injuring three others. This path is part of the city’s major renovation projects for the 2016 Games.
April 27, 2016 – The Olympic torch travels to Brazil to begin a 95 day tour through 83 cities, 26 state capitals and 500 towns.
May 3, 2016 – The Olympic torch arrives in Brazil
May 2016 – Rivaldo, one of Brazil’s most successful and famous soccer players, tells people on social media to avoid coming to this country for the Olympic Games because of the violence plaguing Rio.
May 17, 2016 – The IOC says 32 athletes hoping to compete at the Olympics tested positive for banned substances at the 2008 Beijing Games and could be ruled out for Rio. The IOC does not reveal where the athletes are from or their names, but says 12 countries and 6 different sports are involved.
May 27, 2016 – In an open letter to the World Health Organization, more than 100 prominent doctors and professors call for the summer Olympic Games in Rio de Janeiro to be postponed or moved due to the widening Zika outbreak.
June 3, 2016 – The IOC reveals the first refugee team to ever compete at the Olympic Games. Ten athletes will have the opportunity to compete for gold in Rio.
June 17, 2016 – Rio de Janeiro’s state governor declares a state of emergency because a severe economic crisis had prevented the state from “honoring its commitments to the organization of the Olympic Games,” according to the governor’s order that authorizes additional funding to fulfill obligations during the Games.
July 24, 2016 – The IOC bans the Russian track and field team from the Olympics but not the entire team, which consists of 400 athletes, but tells the various sporting federations to take a close look at the Russians. The lone exception is Darya Klishina, a long jumper, who trains and was tested in the U.S.
July 29, 2016 – The International Weightlifting Federation bans all 8 Russian weightlifters for doping.
July 29, 2016 (same day) – the World Rowing Federation bans 22 of the 28 Russian rowers and coxswains.
Let The Games Begin!