Equities and the Economy

Good morning. U.S. stocks rose yesterday primarily as a result of our Fed Chair Janet Yellen’s testimony and comments before the Senate Banking Committee. She speaks in the House today. The Dow and S&P 500 made new record highs with the former rising 92 points (0.51%) to 18,209 and the latter adding 6 points (0.28%) to 2,115. The Nasdaq was the laggard closing up only 7 points (0.1%) but it was the 10th straight winning session which is its second longest that being mid-2009 when it rose for 12 straight days. Nowadays It seems like one only needs to look at Apple’s performance to know what the Nasdaq is doing and Apple fell marginally yesterday.

Ms. Yellen reiterated the Committee’s position that an interest rate hike would happen no sooner than the second half of the year. She specifically stated an interest rate hike would not occur before the next two FOMC meetings with the third meeting being June 16th and 17th. She went to great lengths to convey that the Fed will signal to the market when the interest rate might occur including the removal of the words “be patient” in their post meeting communique. When the Fed does indeed raise rates she wants it to be fully expected. Believe it or not, there’s a futures product that’s traded that bets when the first rate increase would occur and that is October. Her comments were good for equities but not so good for the greenback with the U.S. dollar falling relative to other currencies. Bonds also rallied a little with yields falling. However, none of the movements were earth shattering.

It seems like almost every day global equity markets are primarily driven by central bank policy whether it’s the Fed, ECB or Bank of Japan. Speaking of Japan, the Nikkei 225 hit a 15 year high yesterday.

There was some economic data released yesterday worth noting. The Conference Board reported that its consumer confidence index fell to 96.4 in February from 103.8 in January with The Street expecting a number of 99.6 so this was a bit of a disappointment. S&P/Case-Shiller stated its 20 city home price index rose 4.5% in December which was good news with prices increasing probably more by a lack of inventory rather than aggressive bidding by buyers.

Although we’ve seen some nice gains intraday resulting in higher settles the mornings continue to start out boring with Dow futures down a totally immaterial 7 points which for lack of a better reason are following European equities which are trading lower right now.

Oil

Both WTI and Brent were very, very quiet yesterday with the former closing down 17¢ at $49.28 and the latter down 24¢ at $58.66. Chatter. Brent prices were supported by the announcement that oil stopped flowing at Libya’s largest oil field, Sarir, and a neighboring field, Messal, due to a loss of electrical power. Reports this morning are the power has been restored. Earlier this week the field was shut down due to a problem with a turbine. Post Qaddafi Libyan oil fields have fallen into ugly disrepair. It will be a long, long time before Libya returns to the OPEC power it used to be.

After yesterday’s close the API reported in their weekly report that aggregated inventories (crude, gasoline, products) rose 4.9 million barrels last week. Although this is bearish being the 5 year average is a drop in inventories of 711,000 barrels April WTI is up 11¢. Due to comments by the Saudi oil misters stating that oil demand is growing. We now await today’s DOE’s report.

That sure didn’t take long! Yesterday the President received Senate Bill 1, the construction of the Keystone Pipeline, on his desk and in quick fashion he gave it the big VETO. No surprise there. Mitch McConnell will try to scrounge together the 67 votes necessary to overturn the veto, but he ain’t gonna get them.

Courtesy of MDA Information Systems LLC

Natural gas

It was penultimate day for the March Nymex natural gas contract which is the day the March contract options expire, and they did so with no fanfare. The March contract settled up 2.3¢ at $2.902 while all the other contracts were either unchanged or down a smidgeon. Traders pay attention to how the options expire trying to get a clue on how the futures contract will expire which is today and much more important to just about everyone for this sets your electricity cost for March if you’re on an unhedged heat rate product or your March natural gas price if you’re on a basis product. Even if you’re not on one of these products it gives you a look on a monthly basis of natural gas’ price direction.

This morning the March contract is up 3.8¢. The weather forecast remains extremely cold for just about the entire U.S. for the next 10 days and then is “only” below normal in the 11-15 day time frame. Natty is being sucked out of storage in huge amounts which will show up in the storage report which comes out tomorrow. No doubt this extended cold period will support prices. That being said, $3 bucks! Wow.

Elsewhere

So if you don’t know Apple is the most valuable company in the world with a market capitalization of 765 billion dollars. But I bet you didn’t know that’s a trifle compared to the Dutch East India Company that was the most valuable company in history worth at its peak 78 million Dutch Guilders which adjusted to today’s dollars is a staggering $7.4 trillion!

On the lighter side, the U.S. Army uses 1.5 billion rounds of ammunition a year. Call of Duty players use 1.5 billion rounds every 17 hours. Have a good day.