Equities and the Economy:
• More record highs.
• Busy week for central banks.
Investors shrugged off the news of a terrorism incident in New York City and took both the Dow and S&P 500 to new record highs yesterday. The Dow rose 57 points to 24,386 and the S&P gained 8 points to 2,660. While not setting a new high, the Nasdaq added 35 points to 6,875 and is only 39 points from its record high. Investors have dealt with fires in Napa and Southern California, two hurricanes and yesterday’s attack, and the stock market just keeps rolling along. It’s the same old theme, every major country’s economy is improving and money is still plentiful thanks to the central banks. Speaking of such, it’s going to be a busy week for the world’s major central banks. The FOMC begins its two day meeting today with virtually everyone expecting a ¼% increase in interest rates to be announced tomorrow. Additionally, the ECB and Bank of England are scheduled to make policy announcements later this week. With respect to the FOMC, the key thing investors will be focusing on is the Fed’s guidance on monetary policy for 2018, i.e. how many (not if) interest rate increases are to be expected. Of course the Fed won’t come out and give a specific number, but investors will parse the words of the post-meeting communique looking for direction. This will be Janet Yellen’s last meeting as Fed Chair. She will step down after a 4 year reign as a relatively dovish commissioner with President Trump’s pick, Jerome “Jay” Powell, taking the reins next year. The word is that Powell’s monetary philosophy is similar to Yellen’s.
Regarding fundamental data, the Labor Department released its JOLTS report yesterday noting job openings in the country fell to under 6 million in October from September’s 6.18 million. While down, it’s still a very strong number being that job postings by employers in September was at a record high level.
This morning it looks like we’re going to see more record highs. The Dow is up 56 points.
• Brent highest settlement since mid-2015.
• North Sea pipeline shut-in.
Oil prices rallied yesterday on news that Ineos shut-in its Forties Pipeline System in the North Sea after a small crack was discovered. The pipe moves about 450,000 bpd of crude. Brent closed up a big $1.29 at $64.69 pulling up WTI which settled 63¢ higher at $57.99. What got the bulls excited was the official statement from Ineos stating they can’t give an estimate of how long the pipeline will be shut-in other than to say “it’s a matter of weeks, not days.”
The report of the Forties pipeline problem pushed the Brent/WTI spread out to 2.5 year highs at $7.35.
This morning the bulls continue to have the momentum with WTI up 33¢. This evening the API releases its crude and products report.
Courtesy of MDA Information Systems LLC
• Prices stabilize.
• Cold returning to the Midwest.
After sliding more than 45¢, ~15%, over the past couple of weeks and losing 9.4% last week, natural gas prices stabilized yesterday with January gas climbing 5.6¢ closing at $2.828. While the weather forecast for the east has repeatedly showed shots of very cold weather, U.S. natural gas production has continued to march higher. For example, on Sunday production in the northeast (Marcellus and Utica) hit a new record high of 27.6 Bcf/d. Y-o-y U.S. production is up 0.6 Bcf/d. Even with increased exports to Mexico and LNG the bears seem to have no fear. This morning’s forecast is showing a big warm up for the eastern 3/4ths of the country in the 6-10 day time frame, but the 11-15 day forecast trended colder with some very, very cold weather centered over the Hudson Bay. All eyes will be focused on if that polar air will drop into the eastern U.S. The bears seem to have no fear for natty is basically flat down 0.3¢ this morning.
I bet this is something you’ve never thought about: the pig. They’re smarter than you may think. Pigs are rated the 4th most intelligent animal. In the old days, sea captains kept pigs on board because they believed that if they got shipwrecked pigs would always swim to the nearest shore. The pig has a prominent place in American history. During the War of 1812, a New York pork packer named Uncle Sam Wilson shipped a boatload of several hundred barrels of pork to U.S. troops. Each barrel was stamped ‘U.S.‘ On the docks, it quickly became bantered about that the ‘U.S.’ stood for ‘Uncle Sam,’ whose large pork shipment looked to be enough to feed the entire army. Thus did ‘Uncle Sam’ come to represent the US Government itself.
The pig is responsible for the naming of one of the most famous streets in the world. To stop free-roaming pigs rampaging through their grain fields, Manhattan Island residents built a long wall on the northern edge of what is now Lower Manhattan. The street that came to board the wall was named… Wall Street.
• Pork is the world’s most widely eaten meat.
• China is the largest producer of pigs.
• In Denmark, there are twice as many pigs as people.
• Pigs are often thought of as dirty, but actually keep themselves cleaner than most pets.
• Pigs lay in the mud because they do not have sweat glands and constantly need water or mud to cool off.