Equities and the Economy:

• Dow closes lower for 5th consecutive day.
• S&P still up 5.8% since November 8th election.

U.S. equities fell for a 5th consecutive session yesterday. The Dow closed down 73 points at 19,732, the S&P lost 8 to 2,264 and the Nasdaq settled 16 points lower at 5,540. This is not to be unexpected. The S&P is up 5.8% in a little over two months and that is unsustainable. A pause, even pullback, is in order. Markets don’t go straight up or down. This is still a bull a market, a “buy the dip” market, so if you are looking to get in use CNN’s Fear& Greed Index as a barometer. If that index gets down to 20 it would be a good entry point. At that level stocks will be oversold. I’m not saying we’re going to get there for it will take further material weakness to reach that level of “fear,” but that is a good entry point.

Today is obviously inauguration day and there may be some consternation about the new administration and subsequent stock performance. There shouldn’t be. As a matter of reference, the S&P sank 5.3% on President Obama’s inauguration day and tumbled 20.4% during the first 34 days of his administration bottoming on March 9, 2009. Since that time the index has nearly tripled and including reinvested dividends has delivered a total return of nearly 295%. The lesson here is “chill.” As Warren Buffett says, “America works. Never bet against America.”

Overnight China released very positive economic news. GDP grew in Q4 2016 from Q3 2016 at an annualized rate of 6.7% which was well above forecasts of 6.0%. Locally, first time jobless claims were released yesterday as usual coming in at 234,000. Wall Street was expecting 253,000. What’s important to you is “What does this mean?” One analyst put it this way. Claims were “shockingly low.” 234,000 is a new four decade long low.

As impressive as jobless claims were (and they were very impressive!) housing starts were even more so. On an annualized basis starts were 1.226 million, up from 1.102 million and above economists’ forecast of 1.200 million. The housing market has been the best performing sector since the Great Recession.

This morning the Dow is up 89. .

Oil

• International Energy Agency reports OPEC production output declined by 320,000 bpd in   December.
• Deeper cuts anticipated in January.

Oil prices got a boost from the IEA’s, not our EIA, report confirming that OPEC production in December fell 320,000 bpd to 33.09 million bpd. The agency attributed the decline to lower Saudi output and disruptions in Nigeria. It added that indications are that further reductions are to be expected in January. On the report oil prices popped but pulled back with WTI closing up 29¢ at $51.37 and Brent posting a 24¢ gain at $54.16. For reference, the OPEC/Non-OPEC agreement is to cut 1.8 million bpd. Very importantly, the agreement’s term is only for 6 months and expires June 30th. For the record, last year oil futures priced jumped 45%, but remember, it was in the low $20’s back in the spring. That’s “shut in” economics.

This morning oil prices are popping with WTI up $1.32 to $52.69 It seems like the $53 figure is like the gravity of a black hole. Prices just get sucked to it. The ying is lower OPEC production. The yang is increasing U.S. oil production.

Courtesy of MDA Information Systems LLC

Natural Gas

• EIA weekly storage report mildly bullish.
• Market waffling around $3.30 for two weeks.

The EIA released its weekly storage reporting a withdrawal of 243 Bcf last week which was marginally more than forecasts of 240 Bcf which brought in a little buying and natural gas closed up 6.6¢ on the day at $3.368/MMBtu. Storage levels are currently 13% below last year and 2.6% below the five year average. Don’t put too much credence in the big deficit to last year. Last year’s winter was one of the warmest in 30 years leaving storage levels extremely high which is why natural gas prices in 2016 were the lowest in nearly 20 years! This morning all of yesterday’s gains are being given back with natty down 6.2¢. The reason; the weather (that’s a surprise!). This morning’s weather forecast for the 11-15 day time frame has been warmed up which has brought in some selling, and taken us down to $3.30, where we’ve broadly traded around for 2 weeks. Chicago and Cincinnati are going to be 20-25 degrees above normal this weekend!

Elsewhere

Being today inauguration day, here are some fun facts on presidential inaugurations:

• Donald J. Trump will be inaugurated today as our 45th, and oldest, president at 70 years old. Ronald Reagan formerly held the title at 69, 17 days shy of his 70th.

• Contrary to popular belief, Theodore Roosevelt, not John F. Kennedy, was the youngest man inaugurated, at 42 years of age.

• In 1953 Texas-born Dwight D. Eisenhower was lassoed in the reviewing stand by a cowboy who rode up to him on a horse.

• Abraham Lincoln’s inauguration party was so wild the police had to be called in to restore order.

• Thomas Jefferson was the first president to be sworn in in Washington, D.C.

• Apparently Bill and Hillary Clinton liked to “kick up their heels.” They attended 14 inaugural balls, the most any president has attended.

• William Henry Harrison set the record for the longest speech which was 110 minutes and 8,495 words. He did it without a coat or hat in a snowstorm. He subsequently got pneumonia and died a month later.

• James Buchanan’s inauguration in 1857 was the first to be photographed.

• G.W. Bush is the only president to kiss the bible as he was sworn in.