Equities and the Economy

Good morning. Yesterday was a choppy day for U.S. equities ending with marginal gains as traders and investors digesting reports that ECB will announce new economic stimulus at its meeting today. The Dow closed up 39 at 17,554, the S&P 500 added 9 to 2,032 and the Nasdaq closed up 12 at 4,667. All chatter. The ECB board is proposing to buy $58 billion in bonds per month staring in March through for a minimum of one year. Well the Mr. Draghi and the ECB delivered this morning announcing the central bank will purchase almost $70 billion ($60 billion euros) per month and be combination of public and private sector securities. The facts of the QE are still sketchy because the news was just released but it appears the bank will buy sovereign bonds (individual country bonds) in a form of “risk sharing” among the countries. I’ll have more on the details of this tomorrow but global markets are up on the news. But only marginally. The major European indexes, which were trading negative prior to the news, are up between 0.46% and 0.56% and the Dow is up 49. However, as I stated the last two days, I believe a lot of this news is already built into the market for European equities have been climbing the last two weeks on the expectation of a QE so it could be a “buy the rumor. Sell the fact” scenario, and 2) thank goodness the ECB did do something for if they hadn’t equities would be getting absolutely obliterated right now. So we’re starting out healthy but as I’ve said many, many times, it’s the closes that are the most important. Stay tuned.

Oil

WTI is finding buyers in the low $40’s with it closing up $1.31 at $47.78. Brent climbed $1.04 settling at $79.03. Oil may be finding a bid on the ECB’s QE talk and news which should stimulate energy demand. At least that’s the logic. Analyzing the terms structures, the one year spread (March ‘15/March ’16) contango has once again narrowed. One or two days does not make a trend but WTI has, at least for now, found support down here at least for now. It may not be time to get long but I wouldn’t short it here. This morning WTI is giving all yesterday’s gain up being down $1.43.

Courtesty of MDA Information Systems LLC

Natural gas

Natural gas prices have been swinging widely lately with 5% moves not abnormal. Yesterday the February Nymex contract jumped 14.3¢ (5.1%) closing at $2.974. Natty seems to be finding comfort trading around $3.00 lately. That’s above the low of 2.783 hit last week but below the $3.352, with tons of volatility in between. Today is EIA storage report day and traders are looking for a withdrawal of 225 Bcf. Whatever the number it’ll be the largest withdrawal in at least 5 years for the largest one in that time frame was 184 Bcf. This morning natty is down 7.2¢ ahead of the report.

Have a nice day.