Equities and the Economy

Good morning and happy Wrong Way Corrigan Day (Google that). It was a good day on Wall Street yesterday with major indexes around the globe closing higher including those here in the U.S. The Dow climbed 70 to 18,120, the S&P 500 added 17 to 2,124 and the Nasdaq rose 64 (1.26%) to 5,163 which, by the way, set a new record high! Netflix help push the tech heavy index higher surging, are you ready, 18%! Additionally, fears of a Grexit are subsiding and coming with it is investors’ appetite for risk, i.e. equities. Helping European equities were ECB president Mario Draghi’s comments saying the central bank will expand aid to troubled Greek banks. It’s a good thing Mr. Draghi is coming to Greece’s rescue for the IMF, one of the creditors of the Brussels Group, cannot. According to its own rules, the IMF cannot lend to Greece having said previously, in a leaked white paper, the Greek fiscal circumstance is impossible and that Greek debts shall never be repaid.

The Labor Department released its weekly jobless claims report with claims coming in at 281,000 which was marginally less than Wall Street was predicting and to one of the lowest levels in a decade so this was welcome economic news. The National Association of Home Builders released their index for June showing a 1 point rise to 60 which tied a 10 year high. More good news. The one bit of disappointing news was the Philadelphia Fed’s report of economic activity for the greater Philadelphia region which was expected to be down from 15 to 12 in June but actually came in at a weak 6. However, being the report was regional its effect upon the market was minimal.

Overnight Asian markets jumped with the ever-volatile Shanghai up 3.51%. That’ll tend to happen when the Chinese government won’t let you sell stocks! It doesn’t take a rocket scientist to figure out that’s a mug’s game. European markets are currently trading mixed as well are the major index equity futures markets here in the U.S., but it is a bit schizophrenic with the Dow down 68 and the Nasdaq up 27. By the way, CNN’s Fear & Greed Index is back up to 34, Fear, from Extreme Fear a week or so ago.

Oil

Oil prices were mixed yesterday with WTI falling 50 cents to $50.91 while Brent climbing 46¢ to $57.51. Being there wasn’t any significant fundamental news let’s call WTI’s drop a function of the dollar which gained vs. the euro. It was only about a month ago when WTI was trading $60, which it had done for about 3 months, and then the bottom fell out, down 15%, on reports of record OPEC production, U.S. production which wasn’t falling despite a rig count 50% of what it was a year ago, the Greek economic crisis, questions around Chinese growth and the coup d’etat being the Iran deal.

Today Baker Hughes releases its weekly rig count which I’m more than the usual curious to see. Wondering if/how these lower prices of late have impacted rig counts. This morning WTI is continuing to erode being down 65¢ rapidly approaching $50.

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA released its weekly natural gas storage report yesterday stating 99 Bcf was injected into storage. Expectations were for 95 Bcf so the actual number was bearish and the market reacted accordingly closing 6.4¢ lower on the day at $2.854. However, we need to remember we had a pretty good rally recently up from $2.72 so the market had some weak length in it.

Weather forecasts have moved warmer overnight showing above normal temperatures for the next 2 weeks and historically we’re getting into the hottest time of year. I guarantee you we’re going to see some big natural gas burns for the remainder of the month by electric generators. Offsetting that strength is healthy production which is being reflected in the storage reports. Let’s see if injections in next few storage reports are greater than the 5 year average. If so, prices could go down this fall when CDD’s drop. This morning traders are taking the day off with natty down 1/10th of a penny. Total chatter.

Elsewhere

Computer hacking has become a bigger and bigger problem with CEO’s or consistently ranking it as one of their greatest concerns. I read a fascinating article in this month’s Fortune magazine regarding Sony’s hack which is to have been done by North Korea. With hacking now even state sponsored maintaining a secure information system is a daunting challenge with most experts agreeing there’s really no way one can be 100% “unhackable.” There’s a saying that goes either you’ve been hacked, or you just haven’t yet discovered you’ve been hacked. The objective now seems to be able to 1) discover as soon as possible you’ve been hacked, and 2) minimize the damage.

United Airlines has taken a novel approach which is a first for the airline energy. They hope to trailblaze the area of airline web security by offering “bug bounties” for uncovering cyber risks. Through the program, independent “researchers” flag problems before malicious hackers can exploit them and are compensated with airline miles. United confirmed it has paid out two maximum awards worth one million miles each with other individuals stating they have received smaller rewards as well. A million miles. Where would you go first?

Have a good weekend.