Equities and the Economy

Good morning. Yesterday U.S. equities ended the way they started, sedate. The Dow closed up 16 points at 18,225 and both the S&P 500 and Nasdaq lost a point ending at 2,114 and 4,967, respectively. You can’t get much less price movement. I must add though that the Dow’s small gain did result in a new record high. Apple’s decline of 2.6% due to an unfavorable court ruling on a patent lawsuit held down the S&P and Nasdaq. I usually don’t mention specific companies, especially when it’s not energy related, but the price action of the largest company in the world does affect the general market.

Fed Chair Janet Yellen completed her second day of testimony, this one before the House, and nothing new was learned. The major takeaway from her comments is that 1) the Fed will be patient in raising interest rates, and 2) it is the Fed’s intention to give fair notice before raising rates.

The major economic report yesterday came from the Commerce Department reporting new home sales fell 0.2% in January and this decline was what was broadcasted throughout the media. However, the decline was better than economists were forecasting and although sales were down month-on-month they are up a robust 5.2% year-on-year.

This morning Asian stocks closed materially higher especially China’s benchmark index (SSE Composite) closing up a whopping 2.15%. That’s equivalent to the Dow gaining 392 points! Wouldn’t we like that! Driving stocks there higher was the HDBC/Markit flash Purchasing Manager’s report showing the index improved from 49.7 to 50.1. That may not seem like much of an improvement but it was a relief because 1) all the news of economic growth there lately has been negative and 2) the index, albeit marginally, is above 50 which indicates expansion.

Here in the U.S. indexes are mixed with Dow futures down 6.

The FCC is making a ruling today that will affect everyone of us. The ruling is on “net neutrality.” It’s widely believed the Commission will rule to regulate the internet like water, electricity and other public utilities. However, it’s not going to end there. ATT has promised to sue if the new rules are approved. Here’s a link for you to get you up to speed on the issue. http://www.nbcnews.com/tech/internet/fcc-decision-net-neutrality-what-does-it-mean-n312636

Oil

Both bellwether oil indexes popped yesterday with WTI jumping $1.71 (3.5%) to $50.99 and Brent adding a big $2.97 (5%) closing at $61.63. Comments by Saudi Arabia’s oil minister, Ali bin Ibrahim Al-Naimi, stating that he is seeing a modest increase in demand for crude in global terms was enough to bring the shorts off the sidelines to cover. Mr. al-Naimi’s comments trumped the DOE’s weekly crude and products report showing in aggregate inventories increasing 2.528 million barrels with the 5 year average of a decrease of 711,000 barrels. It’s very possible that some of this was built into the market for the API reported on Tuesday evening a larger build than the DOE of 4.9 million barrels.

This morning WTI is retreating being down $1.06. It seems that for now $50 is the magic number.

Natural Gas

The March Nymex futures contract expired yesterday with no fanfare closing down $0.008/MMBtu at $2.894. This is the least price movement I’ve seen on an expiring day in a very long time. The entire natural gas strip barely moved with the cal ’16 and ’17 strips up $0.003 and $0.006, respectively.

Today is Thursday and we know what that means: EIA storage report. The market is expecting a withdrawal of 235 Bcf. Last year we saw a withdrawal of 117 Bcf and the five year average is 131 Bcf so you can see this one’s going to be a doozy, as well as next week’s, and the week after that.

Courtesy of MDA Information Services LLC

The weather forecast for the 1-10 day period is little changed, i.e., keister freezing off cold, but the 11-15 day forecast shifted “less cold.” I’m not saying warmer. Just less cold. This is pushing the April contract 5.2¢ lower but most of the other contracts haven’t even traded.

Elsewhere

Scientists have discovered a new black hole they believe was formed 900 million years after the Big Bang. Now this normally won’t merit mentioning in my Report except for one thing. It’s 12 billion times the size of our sun! As Robin would say “Holy Cosmos Batman!” Have a good day.