Equities and the Economy:

• S&P 500 and Nasdaq close at record highs.
• Dow 20,000 back in play.

A solid round of corporate earnings and a positive batch of PMI’s boosted investors’ confidence bringing in buying pushing the S&P 500 and Nasdaq to record highs. The S&P closed up 15 points, 0.66%, at 2,281 and the Nasdaq climbed a hefty 48 points, 0.86%, finishing at 5,601. The Dow posted a very nice gain of 113 points, 0.57%, ending the day at 19,913, 87 points shy of the 20,000 mark. Trading volume was above average as well which is very positive. You want a move in price verified by solid volume. I haven’t mentioned this yet but it’s earnings season and various S&P 500 companies have been reporting revenue and earnings and the financial and technological sectors have posted the best sector results. The financial sector had surged more than 16% between the election and end of the year. Bottom line, yesterday was a very good day for your portfolio.

As I mentioned, strong Purchasing Manager’s Indexes across the world were reported yesterday with Japan’s and the eurozone outperforming economists’ expectations and Markit’s U.S. manufacturing PMI coming in at 55.0 and bearing down on 2015’s high of 55.7.

I always mention the housing because for most folks it’s the largest single item on their personal balance sheets. The NAR yesterday reported the sale of previously owned homes for December dropped by 2.8% from November. Why? A lack of inventory. Last month the number of unsold homes on the market fell 6.3% from a year earlier to 1.65 million units, the lowest since 1999 when NAR started tracking this data!

This morning the Dow is soaring up 135 points and breaking Dow 20,000 setting a new record. Whoop!

Oil

• $53, the gravity of a black hole.
• President Trump signs executive order to advance Keystone and Dakota Access pipelines.

Getting the price news out of the way, oil prices continue to trade around the $53 level which is where’s its more or less been since early December after OPEC announced its production cuts on November 30th. Yesterday WTI settled 43¢ higher at $53.18 and Brent rose 21¢ at $55.44. The big news yesterday was of President Trump’s signing of executive orders to advance the approval of the Keystone XL and Dakota Access pipelines. He also vowed to “renegotiate some of the terms” of the Keystone bill. The pipelines were denied by Obama Administration in November 2015. Trump also issued executive actions declaring the pipelines be constructed of U.S. materials.

This morning WTI is under a little pressure being down 28¢. Prices are down because 1) The API released its weekly crude and products report which was manifestly bearish noting an aggregate build of crude, gasoline and product inventories of a whopping 9.7 million barrels which was way over estimates and the five year average of 2.47 million barrels, and 2) the continued rise of Libyan production as it recovers from internal conflict. Libyan production is currently 700,000 bpd and although that is much less than the 1.6 million bpd prior to their civil war, it is far above the almost zero level back in mid-2011 and again in early 2014.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices creep higher on threat of colder weather.
• Still waffling around $3.300.

Yesterday the February Nymex contract settle 3.6¢ higher at $3.279. It’s really been chatter lately for we’ve spent the last three weeks broadly trading around the $3.300 level. There’s no cold weather forecast for the next couple of weeks which will take us through the end of the month. However, there is some very cold weather forecasted for western Canada in the 11-15 day period which is bringing in some buying. Natty is up 5.4¢ on the bet this polar pig will move south and east inflating heating load in the Midwest and Northeast.

The Canadian producers in Alberta aren’t very happy right now. Due to the warm weather we’ve had for the last couple of weeks the price their getting is a big $1.08/ Mcf less than their U.S. brothers at Henry Hub, LA. Lack of demand south of the 48th parallel.

Elsewhere

As I’ve mentioned numerous times, there’s been a nice rally in the stock market since the November 8th election, at least until early January where it’s gone sideways since that time. Pundits talk a lot about how the stock market performs better in Democrat administrations rather than Republican administrations, but which President saw the largest gain for the Dow during his term in office? You’ll never guess. Republican Calvin Coolidge. According to Bespoke Investment Group the Dow rose a huge 225% on his watch. Coolidge took office in August 1923 after President Warren Harding’s sudden death and he served until March 1929 when Herbert Hoover was sworn in. The Vermont native occupied the White House during the “Roaring Twenties.”

Five other presidents saw double triple digit gains during their terms: Democrats Bill Clinton (227%), Franklin Roosevelt (107%) and our last president Barack Obama (148%). Republicans Ronald Reagan and Dwight Eisenhower also saw double digit gains of 135% and 120%, respectively. Who was in office during the biggest slumps? Coolidge’s successor Hoover has the dubious distinction of overseeing the largest-ever Dow drop, 83%, which occurred during the Great Depression. The second and third biggest drops of 22% and 16.5% occurred under Republican administrations, George H. W. Bush’s and Richard Nixon’s terms, respectively.