Equities and the Economy

U.S. stocks finally had a positive day yesterday with all three major indexes closing higher resulting in being the best day of the year so far! Whoo-hoo! The Dow rose 117 points, 0.72%, finishing at 16,516, the S&P 500 climbed 15, 0.80%, to 1,939 and the Nasdaq closed 1.04% up, 48 points, at 4,686. The Nasdaq snapped an 8 day losing streak. My take on yesterday’s price action is the selling had gotten exhausted over the last week or so there are few left to sell stocks short term. Remember, I’ve been mentioning the market is way oversold in the short term. Equity prices rose even though oil prices fell again which is contrary price action.

Fundamentally there was only one economic report of significance and that was National Federation of Independent Business’ Small Business Economic Trends Report noting its index for December rose 0.4 points to 95.2 which was expected and marginally positive. Drilling down in the report it was interesting to find that small business hiring remained weak in December with average hiring per small business declining to -0.07 workers from November’s +0.01 workers. Now here’s the interesting part. 48% of the small businesses surveyed said they wanted to hire but found few or no qualified applicants for the positions they were trying to fill. What does this say about our training and education system???

We’re getting some follow through today for although China’s Shanghai closed down 2.42%, the Hang Seng and Nikkei ended 1.13% and 2.88% higher, respectively. Currently the European markets are all nicely in the green up between 1.05% and 1.47% and Dow futures are up 117 points. It’s been concerns regarding China’s economy that has pushed the market lower recently and it is a “positive” economic report from the same that is boosting equities today. Trade data today showed Chinese exports shank “only” 1.4% on a y-o-y basis in December and imports fell “only” 7.6%. The reason this was positive is economists were expecting a decline of 8.0% for exports and a decline of 11.0% for imports. This is another example of why I state that it’s more so important how actual data comes in relative to expectations. Expectations are built into the market. That being said, it’s not good in the longer term that these numbers are negative. As Sargent Esterhaus said, “ Hey, let’s be careful out there.”

Oil

As mentioned previously, oil prices fell again yesterday for the 7th consecutive day with WTI closing 97¢ lower at $30.44 and Brent down 69¢ settling at $30.86. WTI traded intraday below $30 which is the first time that’s happened since 2002. Weighing on prices was the EIA’s report noting that although U.S. production is forecast to decline in 2016 and 2017, global production is forecasted to rise and global demand in 2016 is forecasted to decline marginally.

This morning WTI is trading higher 92¢ on both higher equities and yesterday’s API report. The API report noted that crude inventories fell 3.9 million barrels last week which was bullish for the forecast was a rise in inventories. However, gasoline and product inventories grew 14.0 million barrels which was way greater than forecasts. Therefore, the aggregate sum of inventories rose 10.1 million barrels. Not bullish. As I said yesterday and similar to equities, oil prices are due for a bounce to correct oversold conditions.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices got whacked yesterday with the February Nymex contract falling 13.9¢ settling at $2.257. (still amazes me you can buy heart of the winter gas for that price!) The overnight forecast yesterday morning came in materially warmer for the 11-15 day period and all the bears came out of their caves. This morning’s forecast is similar to yesterday’s and being there are no material changes to it natty is acting according being up 1.5¢. Chatter.

The EIA reported yesterday forecasts natural gas demand to increase in 2016 1.1 Bcf/d from 2015’s 75.2 Bcf/d. Consumption in 2017 is forecast to grow by another 0.64 Bcf/d. Supply is expected to grow by 0.4 Bcf/d in 2016 from 2015 and hugely below 2014 to 2015’s growth of 4 Bcf/d. No surprise there to me. Can’t make money at $2.50.

Elsewhere

We all know Andrew Jackson was a quick-tempered, strong-willed and fearless man. But did you also know he shot and killed Charles Dickinson? It all began with a bet between Captain Joseph Erwin, Dickinson’s father-in-law, and Jackson over a horse race. Erwin lost and was forced to pay Jackson $800 though there was disagreement between the two about which notes Jackson was to be paid with. Later Dickinson overheard a secondhand account of things Jackson supposedly said about Erwin over the matter and became angry at Jackson about it. Dickinson actually fought with the man who told him the story, who was a friend of Jackson. Dickinson then sent Thomas Swann to ask Jackson whether what he heard was true, which Jackson denied, but in the process Jackson attacked Swann and said he was a “stupid meddler.” Dickinson then wrote Jackson calling him a “coward and an equivocator.” This escalated to the point where the two were sending a series of insults back and forth, including publishing some in the National Review, such as the last one which was the final straw. Published in May of 1806 by Dickinson, he called Jackson a “worthless scoundrel, … a poltroon and a coward” which was printed after Jackson called Dickinson a “worthless, drunken and blackguard.”

Despite the fact that Dickinson was known to be one of the best marksman in Tennessee, Jackson challenged him to a duel. Because dueling was illegal in Tennessee, they met in Logan, Kentucky on the shores of the Red River. Even though Dickinson was a good marksman, Jackson let Dickinson fire first by turning and not firing thus conceding the first shot. Dickinson’s shot was dead on hitting Jackson’s in the chest just a few inches from his heart and breaking two ribs. Jackson waivered but amazingly stayed on his feet. He then carefully aimed at Dickinson and pulled the trigger, and nothing happened. The hammer stopped half-cocked. Jackson immediately re-cocked it, pulled the trigger and this time the gun went and the bullet hit Dickinson in the chest hitting an artery killing Dickinson. As we all know, Jackson went on to become our 7th president, however Jackson carried Dickinson with him his entire lifetime for Dickinson’s bullet was lodged so close to Jackson’s heart it could not be safely removed and resided in his chest for the remaining 39 years of his life.