Equities and the Economy

Good morning. In a light volume day the three bellwether indexes closed mixed. While the Dow and S&P 500 fell with the former losing 44 points to 17,986 and the latter down 2 points to 2,097, the tech-heavy Nasdaq bucked the trend gaining 18 points to 4,925. As is indicated by the numbers, there was no major economic news to move the market. The weekly jobless claims report was marginally better than expected but oil prices fell which means those oil and gas stocks in the major indexes, like Exxon Mobil, got hit. On the bearish side, the Fed’s Philadelphia manufacturing index was somewhat disappointing puts investors on notice, but one data point does not make a trend. There’s no change in the German and Greek negotiations. The 19 eurozone finance ministers will meet today to discuss the various proposals. Let’s move on to today.

Asian shares closed higher while European shares are trading mixed and U.S. equity futures are down marginally and the Dow is chattering around being down 7 points. For all of this holiday shortened week investors have remained on the sidelines awaiting either good, strong fundamental data to take us through the record highs, take us through resistance, or bearish news, which would be something like Greece leaving the eurozone and returning to the drachma. There is one major economic data point today, the flash purchasing managers index for February which I’ll discuss in Monday’s report. PMI’s out of the eurozone recently showed business activity in the currency union grew at a faster pace in February than expected reaching a 7 month high.

Oil

It was a ying/yang thing with oil yesterday. On the bearish side the DOE released its weekly crude and products report showing that aggregate inventories of crude, gasoline and distillates rose 4.39 million barrels last week which is 5.58 million barrels more than the average of the last 5 years (the 5 year average was for a decline in inventories for the week). The yang, or bullish thing, was the report was not as bearish as the API report released a day earlier showing an aggregate build of 12.9 million barrels. So while although bearish, the data was not a surprise and WTI ended 98¢ lower on the day while Brent lost only 32¢ settling at $60.21. Brent prices are being supported by curtailed oil exports from Libya where chaos is the order of the day resulting from the power vacuum of Qaddafi’s overthrow with the situation there continuing to deteriorate with at least 5 different tribes or political groups are at war.

Baker Hughes will be releasing its rig count report today which is after years of not being investors’ and traders’ radar is. As of last week there are 27% fewer rigs working in the U.S. than last year at this time. Fully expect today’s report to show a further decline. West Texas’s Permian Basin and North Dakota’s Bakken/Williston Basin are being mothballed losing the most rigs that being 198 and 63 rigs, respectively. The steady decline in rig count is what the oil bulls are hanging their hats on to drive prices up and the combination of short covering and traders getting long to get a position on is what has driven WTI prices up 20% in the last month.

This morning WTI is down 74¢

Courtesy of MDA Information Services LLC

Natural Gas

The EIA released its weekly natural gas storage report showing a withdrawal of 111 Bcf which was mildly bearish compared to market expectations of 118 Bcf. The market initially sold off but recovered its losses by the end of the day settling 0.3¢ higher at $2.834. The bitter, record setting cold weather encompassing the eastern 2/3rds of the country is resulting is very high cash prices with the high of the country being $75/MMBtu in New York due a nuclear power plant tripping off in the western part of the state. The weather forecast remains unchanged with demand for natural gas being very high. According to our private forecasting service the final 10 days of February are forecast to be the coldest on record in terms of gas weighted hearing degree days. Have you folks in the Midwest and east booked your flight to the Bahamas yet?

This morning the duration of the cold and respective natural gas demand is starting to be recognized by traders and natty is up 12.4¢.

Elsewhere

Now I writing about the following because it is extremely close to home to me. There’s a new trend in Japan called ‘yaeba,’ or crooked teeth. Yaeba is literally translated as “double tooth.” Apparently girls with yaebas , their upper canines rearranged, are considered cute and attractive. This trend is so popular with girls in their teens and twenties that some have gone to great lengths to attain the yaeba look, even undergoing expensive dental operations. I sure wish this had caught on here in the U.S. I have two daughters in braces. Have a great weekend and stoke the fireplace.