Equities and the Economy:
Whoo-hoo! And I’m not talking about Michael Phelps getting another gold metal, which is spectacular, I’m talking about Friday’s equities price action which put the S&P 500 and Nasdaq at record highs! On the heels of a very strong Labor Department employment report for July on Friday showing the U.S. added a whopping 225,000 jobs the S&P rose 19 points, 0.86%, finishing at 2,183 and the Nasdaq popped 55 points, a very nice 1.06%, ending at 5,221. Although not setting a record, the Dow posted great numbers surging 191 points, 1.04%, ending at 18,544. The job gains in June followed a stellar gain in June giving investors’ confidence that the U.S. economy is healthy despite relatively muted GDP data. Employment is heating up so even more discussion will be about a Fed interest rate hike. That being said, the bet is still there will not be an interest rate hike this year.
Moving onto today, the Asian markets all closed materially higher. This was more the result of the U.S. market action on Friday for China today released trade figures for July stating both imports and exports declined, 12% y-o-y for the former and 4.4% y-o-y for the latter, which is the steepest decline since February. But it doesn’t matter because as Dr. Fly wrote in his blog “Everything you thought you knew about economics, taught to you by old guard professors in college, was a lie. Supply and demand only matter when the economy isn’t being managed by professionals.”
This morning the Dow is down 19 points. Chatter. By the way, gold is at a 2 ½ month low.
Friday’s labor report may have helped equities but it didn’t help the oil bulls. Both WTI and Brent closed pretty much at their Thursday settles with the former down 13¢ to $41.80 and the latter off 2¢ at $44.27. Baker Hughes released its rig count report on Friday as usual noting the oil rig count rose 7 on the week while the natural gas rig count fell 5. This is the 6th consecutive week the rig count has increased. The Permian Basin in west Texas has some the of the best economics in the U.S. for oil development and its evidenced in the fact that 5 of the seven rig gain was in that basin. Louisiana saw the biggest rig decline of any state falling by 4 rigs. Hurting all commodities priced in the greenback is the value of the dollar which on Friday had its biggest daily advance in 6 weeks.
Remember last week when I told you a couple of times the oil market was way oversold? Well the evidence came out on Friday. The CFTC reported that the number of short futures position in the market held by money managers for the week ending August 2nd was 218,600, the greatest amount since 2006! This led to the price bounce on Thursday, which is continuing the morning with WTI up $1.05. Oil prices are also getting a boost this morning on reports that several members of OPEC are once again pushing for a deal to freeze production. Qatar’s energy minister said today the cartel will hold an informal meeting in Algeria on September 26-28. If you recall, a move to freeze production died back in April, and it’s going to fail again.
Courtesy of MDA Information Systems, LLC
Despite a bullish storage report on Thursday showing a withdrawal from storage the prior week (which hasn’t happened for 10 years in July), natty prices fell 6.2¢ settling at $2.772. The $2.75 level has the pull of a black hole. This morning natty is down 6.1¢ on a couple of factors. First, the weather forecast, while still showing above normal temperatures for the east, it’s cooler than it was last week and, second, natural gas production is rebounding somewhat with U.S. production now up at levels last seen in May. Don’t forget that although weekly natural gas injections have been way below average this summer, absolute storage levels are still at a record high for this time of year being 16% above the 5 year average. And September is right around the corner.
It was a big weekend for the Olympics. Here are some facts.
The top 3 countries with the highest metal count are the U.S., China and Italy with 12, 8 and 7, respectively.
So far there have been 12 new Olympic records set and 6 new world records.
Carrie Walsh Jennings, the USA beach volleyball player, is playing in her 4th Olympics and won gold in the previous 3. During her 11 year run she has only lost one set and has never lost a match. She and her new teammate, April Ross, are seeded third in this Olympics.
After having led for much of the late stages of the woman’s 84.5 mile bicycle race and being in prime position to win the gold medal, American Mara Abbott couldn’t hold off a charging trio behind her who passed her with only 150 meters to go leaving her to finish 4th and off the podium.
Great Britain’s Adam Peaty won the 100 meter breaststroke gold medal competing in his first Olympic Games. He did so in world record time, racing to 57.13 seconds. The win marked the largest margin of victory ever in this event: 1.56 seconds, which is a ridiculously large margin of victory for such a short race.