Equities and the Economy

U.S. stocks stabilized yesterday, i.e. stopped falling, in a day of choppy trading. The Dow closed down 13 points at 16,014, the S&P 500 was off a single digit to 1,852 and the Nasdaq fell 15 points to 4,269. We needed this after two days of material weakness. With the lack of significant movement yesterday let’s move on to the fundamental economic data. Yesterday the Labor Department released its Job Opening and Labor Turnover Survey (JOLTS) showing employers posted 261,000, 4.9%, more jobs in December than they had in November totaling 5.61 million marking the second highest number ever recorded and just barely behind the 5.67 million jobs posted in July. Further, the increasingly famous “quit rate” rose 6.9% to 3.1 million for the month, the highest rate in over 9 years! A rising “quit rate” is a sign employees are confident enough in their prospects that they can quit one job certain they can find another better job. This was always one of past Fed Chairman Greenspan’s favorite indices.

Also released yesterday was the National Federation of Independent Business Small Business Economic Trends report. The report tracks optimism among small business (duh!) and that optimism took a setback in January with the index falling 1.3 points to 93.9 and the weakest since February 2014.

So we had mixed economic reports yesterday but let’s move on to real time which is Fed Chairperson Janet Yellen’s comments in prepared testimony before the House Committee on Financial services this morning. In that testimony she stated that tightening financial conditions driven by falling stock prices, uncertainty over China and a global reassessment of credit risk could throw the U.S. economy off track from an otherwise solid course. However, she added that family incomes and wealth are rising, domestic spending “ has continued to advance,” and business investment outside the oil sector accelerated in the second half of the year. Here is the key take away though. Yellen said there are good reasons to believe the United States will stay on path of moderate growth that will allow the Fed to pursue “gradual” adjustments to monetary policy. She reinforced that “monetary growth is by no means on a preset course.” So how is the market taking her words? Bullishly, as is, “we’re going to be ok” and the Fed will be slow to raise interest rate with the Dow up 131 points.

Let’s get to the technical picture because it has come very much into play lately. On Friday we broke the 1,859 support, basis the S&P, and yesterday we didn’t see follow through and remained marginally under that level. The 1,859ish level is important because, not including the last two days, we’ve bounce off this level 4 times in the last 18 months. So we need to close, and soon, above that level to get some bullish sentiment. At least to halt the selling. Hopefully today will be that day.

Oil

Oil prices got trounced yesterday with WTI losing $1.75, 5.8%, closing at $27.94 and Brent closing down $2.56, a whopping 7.8%, at $30.32. Brent’s daily loss was its greatest since late August 2015. Oil prices have closed lower now for 4 consecutive days. The impetus for the move was the IEA’s report yesterday stating they expect the global oil surplus in the first have of 2016 to increase as compared to previous estimates on the back of higher output from Iran and Iraq compounded by slowing global demand. This morning a news report came out mentioning that Iran stated it was open to cooperating with Saudi Arabia to bolster prices. Seriously?! Is anyone really going to believe that these Sunni and Shiite enemies will cooperate on oil prices? If so, call me. I have a bridge to sell. This morning WTI is up 49¢.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices gave back some of its recent gains closing down 4.2¢ at $2.098. As is typical in the winter, it was the weather forecast that moved prices and said forecast came in yesterday morning warmer than the previous one for the 11-15 time frame. You folks in the east are currently experiencing a serious cold spat of weather with temperatures in Ohio a very cold 8-15 degrees below normal over the next 5 days. This will pull some gas out of storage. These temps will be a distant memory in 2 weeks though when temperatures warm up to 5-8 degrees above normal. I bet you can’t wait! This morning the warmer 11-15 day forecast is weighing on the bulls with natty down 5.5¢ and once again attacking the $2.00 level.

Elsewhere

If you watched the Super Bowl you know that Beyoncé performed during the halftime show. She sang her new song “Formation” which was released, along with its video, literally just the day before, on Saturday. In the song Beyoncé refers to Red Lobster as a reward for sex. The possibly unforeseen ramifications: Red Lobster stated that on Super Bowl Sunday sales got a “Beyoncé bounce” soaring 33%! The food chain said it trended on Twitter for the first time in history after the song’s release and the brand was mentioned about 300,000 times over the weekend, including 42,000 times in a single hour.