Good morning. U.S. stocks bounced nicely from Monday’s losses yesterday driven by fundamental news. Yesterday the Dow climbed a nice 103 points closing at 17,880, the S&P 500 jumped 14 to 2,067 and the Nasdaq was up 29 to 4,756. Driving equities higher was positive news on the construction front with spending rising a stout 1.1% in October with analysts looking for something close to 0.6%. Single family home construction rose 1.8% and government building was up 2.3%. Now before you get all riled up about the increased spending for “government building” note that it was the sub-group of new school construction that led the way. I’m good with that. Also, a survey was released yesterday polling CEO’s across the country and it showed that 40% of them intend to increase their labor force next year. Obviously this is positive for future employment numbers. Speaking of employment numbers, all investors will be keying in on the ADP private payrolls report for November released today. The importance of it is it gives a clue as to what non-farm payrolls might be in the Labor Department’s report which is released the first Friday of every month which is in 2 days.

This morning both Asian and European equities are chopping around either side of unchanged and that is exactly what U.S. equity futures are doing with the Dow down 5 points. Chatter. By the way, The ECB’s will meet for the last time this year tomorrow.

The U.S. dollar continues to strengthen relative to other currencies hitting a new 7 year high vs. the yen and a 2 year high against the euro. This is putting downward price pressure on all commodities priced in U.S. dollars. The greenback’s strength is completely logical for our economy, albeit not “screaming,” is performing the best of any Western economy and debatably, the best in the world. This is just fuel on the fundamental fire for pushing crude prices lower. After a big jump on Monday, which really was from an egregiously oversold market, oil got hit yesterday giving back a big chunk of what it had gained with WTI closing down $2.12 at $66.88 and Brent down almost the same, $2.00, at $70.54. I believe Monday’s low near $64 will be the low for a while. Now I’m not buying it but a bounce or, at a minimum, a consolidation is due. Any bounce will be driven more by headlines than fundamentals. Such is the way of the oil market trades. Here’s an interesting twist. Saudi Prince Turki, the former head of the Saudi Intelligence Agency and a person of influence in Riyadh, said yesterday the Kingdom may consider cutting production but if and only if Russia were to do so. There’s a huge message here and that is Saudi Arabia (well at least Prince Turki) does not believe OPEC will cut production. Russia will not cut production. It cannot. She needs every bit of cash flow she can garner for Russia needs the equivalent of $100/bbl WTI to meet budget. Things are going horribly bad for Mr. Putin. The precipitous drop in oil prices as well as sanctions are crushing Russia and it is being seen in the markets via the exchange rate for the ruble which has fallen, sit down, a staggering 50% since the summer vs. the U.S. dollar! Folks, in the world of foreign exchange a movement of 5% over the course of a year is material. A 10% move is huge. A 50% move in less than 6 months is, well, disastrous! In Russia, the oligarchs, political leaders and now the citizens are selling their rubles as fast as they can for euros, dollars, maybe even gold.

This morning WTI is getting a small bid up 62¢. I was talking with a client yesterday regarding oil prices and the cost of drilling and completing in various plays throughout the country. He stated that if WTI prices remain at these levels for 6 months 90% of the rigs in the Bakken will be “laid down.” That is the industry term for not working. The gentleman should know. He’s has production there.

Natural gas got hammered yesterday falling 13.3¢, 3.3%, settling at $3.874. Folks this the price of January natural gas which is typically one of the highest price months of the year. That being said, the price curve is very, very flat with the spread between January and June only 30¢. Not a good environment if you own a storage facility.

Courtesy of MDA Information Systems LLC

Bears hibernate in winter on cold weather but they’ll coming out of their caves in 11-15 days for the weather forecast is amazingly warm for that term with today’s forecast even warmer than yesterday’s. There’s a high correlation between the weather forecast and natty prices in the winter and that correlation is holding this morning with the January contract down 7.3¢. Have a good day.

Bob Shiring