Equities and Economy

Stocks tumbled yesterday as the Dow fell for the 5th consecutive day closing down 255 points, 1.60%, at 15,660. The S&P 500 lost 23, 1.23%, to 1,829. The Nasdaq fared the best closing down only 0.39%, at 4,267. It could have been, oh, so much worse. At 2:37 EST the Dow was down 412 points! For the last 6 weeks it’s been a stampede to shed risk with stock prices falling and safe havens U.S. Treasuries and gold rallying. Gold closed at its highest price in about a year. This week it’s been the banking sector, both in Europe and the U.S., that’s been getting hammered. Germany’s Deutsche Bank, maybe THE stalworth bank in Europe, fell 3.8% on Tuesday to a record low and was down 38% year-to-date. Ouch! The banking sector skidded 7% so far this month and is down 15% this year. The combination of negative interest rates and exposure to the oil industry has got investors jittery. Making matters worse, yesterday morning we in the states wake up to French Bank Societe Generale having issued profit warnings. Also weighing on stocks were comments by Janet Yellen Wednesday and Thursday while testifying before Congress. Now investors weren’t really expecting that much but were hoping she might lean a little more doveishly with the recent unimpressive corporate earnings announcements and the fall in equity prices. But she stated that although the recent turbulence and slowing growth could impede the U.S. economy, she said the Fed had still not seen much evidence of a negative feedback loop here at home with investors interpreting that to be the Fed is leaving interest rate hikes on the table for later this year.

The only fundamental economic report of significance was the Labor Department released its weekly jobless claims (always on Thursday) coming in a little better than expected. Claims were 269,000 last week, down 16,000 and better than economists’ were forecasting something closer to 280,000.

We can all breathe a sigh of relief this morning for the Dow is up a very strong 166 points on the heels of higher oil prices. By the way, I need to make a correction. Yesterday I stated my S&P 500 target to the downside is 1,640. That was an error on my part. My target is 1,721.

Oil

A couple things, that are connected, are going on this morning. UAE’s Oil Minister, Suhail Al Mazrouei, said that OPEC producers are ready to work together to manage oil production. Venezuela’s Oil Minister, Mr. Eulogio del Pino, has been flying around the world of late meeting with the leaders of OPEC and non-OPEC producers, not the U.S. of course, in hopes of securing a meeting at which the parties would agree to at least limit production to current levels. The Russians are on board; Qatar seems amenable; and the UAE is obviously willing to meet. Ah, but it is the Saudis that will carry the day for they are the only ones that will really abide by any agreement, and they have yet to agree. You see, all the other countries may agree to production limits, but they always cheat. They always have, and they always will. It is only the Saudis who do what they say. Every country, but Saudi Arabia, will produce every drop they can. So today’s talk is bringing in some short covering and WTI is up a big $2.43. It’s Friday as well as a long holiday weekend so short term traders are taking some chips off the table.

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA released its weekly natural gas storage report stating the U.S. withdrew 70 Bcf last week which was markedly less than the forecast of an 80 Bcf withdrawal. Prices reacted appropriately falling 5.2¢ and closing below the egregiously low number of $2.00 at $1.994. Storage levels are now 83 Bcf, 17%, above last year and 543 Bcf, a whopping 23%, above the five year average. The next 5 days are going to be quite cold across the east (Houston’s high is predicted to be 78 today ) with moderating temperatures following in the 6-15 day time frame. That being said, forecasters have shifted temperatures cooler in the 11-15 day time frame, but it’s not helping the bulls with natty down 3.2¢ as I write.

The coal industry is getting it from all sides. We all know how the EPA has been hammering on them, but they are also feeling it from simple free markets. Natural gas prices have been so low it’s displaced a lot of coal in the electric generation sector. The EIA yesterday reported coal production decreased 30% to 12.9 million short tones vs. a year ago. Coal carloads on U.S. railroads, a closely watched metric, on the week ending February 6th were 30% below a year ago.

Elsewhere

Thomas Edison invented the light bulb, right. Wrong! It was British inventor Humphry Davy who invented an incandescent light bulb in 1801 and created and “arc lamp” in 1809. British inventor Joseph Swan started experimenting with light bulb designs in 1850. On December 18,1878 he demonstrated a light bulb at a lecture that soon had the attention of the world, including Edison. Edison entered the scene, and the race, in 1878 to develop an effective bulb. He struggled with a solution at first but, with the assistance of Francis Upton, on October 22, 1879 had a breakthrough. His bulb burned continuously for 13 hours. Edison filed for a patent on November 4, 1879. Edison continued with experiments and by the end of 1880 his light bulbs burned for up to 600 hours, eventually getting up to 1,200 hours.

Edison went on to make a ton of money from the light bulb, but Swan sued Edison for infringement, and won. As part of the settlement Edison was forced to take Swan as a partner but later bought him out in the company that was to become General Electric. Bottom line, it is generally recognized that Humphry Davy invented the light bulb and Thomas Edison perfected it.