Equities and the Economy:
• Stocks closed mixed yesterday.
• November employment report just released. Unemployment rate falls to 4.6%, lowest in 9 years.
It was a weird day on Wall Street yesterday. The Dow gained a nice 68 points, 0.4%, closing at 19,192 and a new record high while the S&P 500 fell 8 points, also 0.4%, to 2,191 while the Nasdaq got whacked losing 1.4%, 73 points, ending at 5,251. The biotechnology sector got hit 1.7% pulling the tech heavy index down. Ever since the election there’s been a big rotation 1) out of bonds into equities and 2) within equities, a rotation out of big cap technology stocks and into financials. Speaking of bonds, yesterday the 10-year Treasury bond hit a 16 month high at 2.44%.
Economic data yesterday was mixed but pointed to continued growth in the labor market and manufacturing. The ISM manufacturing index rose to 53.2 in November from 51.9 in October. Remember, a reading above 50 indicates expansion. Also, Markit’s November final PMI was at 54.1 compared to 53.4 in October. The Labor Department released its weekly jobless claims report yesterday noting claims rose by 26,000 to 268,000. The time period was for Thanksgiving week and data can get squirrely for that week. What’s important here is that claims are still at multidecade lows.
This morning the Labor Department released the granddaddy of reports that being the employment situation report for November and it was strong! Nonfarm payrolls rose by 178,000 last month with the unemployment rate dropping 3/10% to 4.6% which is the lowest level since August 2007. I’ll discuss the details of this report more on Monday.
It’s very quiet this morning with the Dow down 1 and the Nasdaq up 22.
• Oil prices continue to march higher on OPEC agreement. WTI price up 15% in two days.
• WTI closes up $1.62 at $51.06.
Crude extended its Wednesday’s gains yesterday with WTI rising $1.62, 3.3%, settling at $51.06. Brent climbed $2.10, 4.0%, closing at $53.94. As mentioned yesterday, OPEC agreed to its first production cut since 2008 reducing output by 1.2 million bpd with Russia adding 300,000 bpd for a total of 1.5 million bpd. Saudi Arabia is taking the biggest hit reducing production by 500,000 bpd. Saudi Arabia’s archenemy, Iran, is not required to cut. One new and important item in the agreement is that OPEC shall create a committee that will over-see compliance of the various production cuts. I have a feeling that committee is going to very, very busy.
This morning WTI is up 33¢.
When you go, go big! Oil major BP announced yesterday they’re committing $9 billion to its Mad Dog project in the Gulf of Mexico. That’s a “b” folks! It will be their first major new platform in the region since the 2010 explosion at its Macondo well. Actually, the project cost has declined by over half from the original $20 billion price tag.
Courtesy of MDA Information Systems LLC
• Natural gas prices rocket higher closing up 15.3¢ at $3.505.
• EIA storage report noted a 50 Bcf withdrawal last week.
With cold predicted to hit the nation next week tumbling down into the deep south buyers were out in force yesterday buying natty. Add in increasing exports to Mexico and LNG out-put out and flat U.S. production and you get a pretty bullish picture. The cash price at Henry Hub, the Nymex contract delivery point, hit a yearly high yesterday at $3.41. That being said, the front month price is up more than a dollar (40%) over the past month to a two year high which means a lot of the bull move is baked in.
The EIA released its weekly storage report stating 50 Bcf was withdrawn from U.S. storage fields last week. Current levels are 24 Bcf, 0.6%, above last year at this time and 235 Bcf,6%, above the 5 year average.
This morning I’m seeing a tad of profit taking with natty down 3.6¢.
Canada’s cops will be severely punishing drunk drivers this holiday season. In addition to a hefty fine, a criminal charge and a year’s driving suspension they will subject their hand-cuffed back seat guests to the music of Nickelback on their way to jail. The Kensington Police Service in the Prince Edward Island province posted a message on Facebook explaining the “punishment” last weekend. They said “We figure if you are foolish enough to get behind the wheel after drinking then a little Chad Kroeger and the boys is the perfect gift for you.” The police department’s statement went viral on social media after it was posted. Online distaste for the band had built up over the years to the point where an otherwise routine post poking fun at the rock group caught on quickly. But why do people resent and mock Nickelback so much? The general consensus among Nickelback haters is that the band’s music is bland and derivative, a pastiche of the work of beloved hard rock bands, but without the grit or soul that made them enjoyable. Be sure to take a Photograph of the Rockstar.