Equities and the Economy:

• S&P 500 closes lower for 4th consecutive session.
• For the month of January, all three major bourses post gains.

It was a mixed bag for U.S. equities yesterday with the Dow getting smacked closing down 107 points, a half percent, at 19,864, the S&P 500 ending down 2 at 2,279 and the Nasdaq actually closing a point higher at 5,614. It was a good month for U.S. stocks. The Dow gained ½%, the S&P logged a 1.8% gain and the Nasdaq booked a big 4.3% rise. The market’s recent pullback has been blamed on President Trump’s executive order last weekend on immigration bringing some uncertainty to the market but my opinion is this is an excuse for some profitmaking. As mentioned, the indexes had a fair to good January. All indications are we’re still in a bull market.

The Conference Board said yesterday that consumer confidence slipped to 111.8 from December’s 113.3, however, December’s level was a 15 year high! The Labor Department reported that employment costs rose 0.5% in Q4 2016. For the full year employment costs rose 2.2%. I’m sure the Fed noted that data. Remember, their inflation target is 2% and wage inflation, or the lack thereof, is the primary driver of inflation. Speaking of the Fed, the FOMC concludes its two day meeting today and is not expected to change interest rates. It’s January and that means the voting membership of the FOMC rotates. Two monetary “hawks” have left, Ms. George and Ms. Meister, and their replacements are more centrist to left which means the FOMC will shift marginally to a dovish, or more accommodating monetary policy. That being said, this is Janet Yellen’s Fed and she almost always carries the day.

Locally, the Dallas Fed released its Texas Manufacturing Outlook Survey, which includes the oil and gas sector, noting new orders climbed to a multi-year high and general business activity increased for a 4th consecutive month and it’s highest reading since April 2010.

This morning the Dow is up 93 getting a bounce from European stocks which are materially higher.

Oil

• Oil prices remain stagnant.
• API data released last evening bearish.

Oil prices ended little changed yesterday with WTI closing 18¢ higher at $52.81 and Brent up 47¢ at $55.70. This morning WTI is up 41¢ which is quite interesting being that the API released a manifestly bearish weekly crude and products report last evening. Whereas the 5 year average rise in aggregate inventories for last week is 6.82 million barrels, the API stated last week’s inventories grew by a whopping 11.0 million barrels! When bearish news comes out and a market doesn’t fall attention must be paid!

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices close at lowest level in 3 weeks.
• No cold weather in sight.

March natural gas closed down 11.5¢ yesterday day at $3.117/MMBtu which is its lowest close in 3 weeks. The cold weather in western Canada is not dropping into the U.S. and the bulls are dumping the length they put on counting on that move. The weather forecast slowly continues to trend marginally warmer in each morning’s forecast this week. For the 6-15 day time frame warm temperatures are predicted for almost the entire country with the exception of the very upper Midwest and east of the Appalachians which will be normal weather. The things the bulls are hanging their hat on are 1) U.S. dry natural gas production is down about 2.5 Bcf/d from a year ago, 2) demand is increasing via more gas fired electricity plants and 3) exports to Mexico and demand for natural gas feedstock for LNG. Those three are not to be discounted.

This morning natty is up 5¢. I think we’re seeing some short covering, taking profits, after having numerous consecutive days of declining prices.

Elsewhere

Investing legend Warren Buffett has an estimated net worth of $74 billion, making him the third richest man in the world. But you’d never know it from his lifestyle. The 86-year-old billionaire still lives in the five-bedroom home in Omaha, Nebraska, that he bought in 1958 for $31,500 . And he never spends more than $3.17 on breakfast. On his five-minute drive to the office, which he’s been doing for the past 54 years, Buffett stops by McDonald’s and orders one of three items. “I tell my wife, as I shave in the morning, I say, ‘Either $2.61, $2.95, or $3.17.’ And she puts that amount in the little cup by me here [in the car],” he explains in HBO’s documentary, “Becoming Warren Buffett,” which debuted Monday. Each amount corresponds with a different option at McDonald’s. “When I’m not feeling quite so prosperous, I might go with the $2.61, which is two sausage patties, and then I put them together and pour myself a Coke,” he tells director Peter Kunhardt in the documentary. “$3.17 is a bacon, egg and cheese biscuit, but the market’s down this morning, so I’ll pass up the $3.17 and go with the $2.95.” Buffett proceeds to order a sausage, egg and cheese and pay using exact change.