Equities and the Economy:

• U.S. stocks fell Friday on profit taking.
• All three major indexes post nice gains for 2016.

U.S. stocks finished the year on a mild down note with the Dow losing 57 ending at 19,762, the S&P 500 falling 10 points to 2,239 and the Nasdaq ended down 49 points to 5,383. Typical for the last trading day of the year, volume was very light. But that’s all ancient history now. Much more importantly for your portfolio and 401K is how the indexes performed for the year. Pretty darn well, especially considering the lousy start to 2016 with the Dow posting the largest-ever five-day drop to start a new calendar year losing more than 6%. However, in the second half of the year equities began a strong rally and then after Donald Trump’s election victory was as if someone threw gasoline on the stock market fire with the Dow jumping 7.8% since November 8th, its best Election Day to end-of-year performance since Dwight D. Eisenhower was elected president in 1952. For the year the Dow recorded a strong 13.4% gain, the S&P 500 logged at 9.5% rise and the Nasdaq rose 7.5%. The big gainer, though, was the Russell 2000, a small-cap stock index, which popped a whopping 19.4% for the year as investors’ risk appetite markedly increased.

It’s a new year and it’s starting out well with the Dow up a big 156 points. This follows the European and Asian markets higher. Regarding the latter, a private research firm reported Chinese manufacturing activity picked up in December with the PMI index hitting a high not seen since 2013 which pushed the Asian markets higher. Regarding Europe, Germany’s DAX closed up 1% yesterday its biggest gain since mid-December.

Oil

• Oil prices little changed on Friday.
• Prices post big gains for 2016.

Oil prices were little changed last Friday with WTI closing down a nickel at $53.72 and Brent falling even less, 3¢, settling at $56.82. However, oil prices posted big gains in 2016 with WTI logging nearly a 45% rise and more than 8% just in December. The combination of slightly decreasing U.S. production and OPEC agreement with non-OPEC countries to cut about 1.6 million bpd of production in 2017 drove the price rise. The big question is whether these countries will follow through on their commitments. To help keep producers in line, for the first time ever OPEC has established a committee to monitor participants production. To give you an idea how tough it’s going to be to cut global production just look at Libya. Its National Oil Corporation reported yesterday the country has increased production by 85,000 bpd from December’s average to 685,000 bpd. Now Libya was exempt from the agreement but the point here is the impetus amongst all the players is to increase production to feed their respective treasuries. And don’t forget about the caustic relationship between Saudi Arabia and Iran.

Well the curtailment agreement’s effective date was January 1st and Kuwait and Oman both announced yesterday they have implemented their production cuts. On the news oil prices have risen with WTI trading up $1.25 this morning and posting new 18 month highs. Both WTI and Brent prices have risen more than 30% over the past 7 weeks.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices fall on Friday put post a nearly 60% gain in 2016.
• Prices getting knackered this morning.

Natural gas closed down on Friday with the February Nymex contract falling 7.8¢ closing at $3.724 on profit taking and really the lack of any reports of more cold in the 11-15 day time frame. Well this morning the new forecast is out and the bulls are hamburger. When I received the noon forecast update on Friday it hinted of a warming in the 11-15 day forecast. Natty prices fell a couple of cents on the news but I believe no one wanted to put on new trades in the winter with a three day holiday upon us. Today’s forecast verified the warming trend alluded to on Friday, and even made it warmer. The bears have taken over the world and have pushed prices down a huge 28.6¢ this morning.

Elsewhere

With another Arctic Bomb dropping upon the U.S. this week here’s a question. At what temperature are Celsius and Fahrenheit equal, i.e., the same number?

Answer: minus 40 degrees. I hope to never experience that!