Equities and the Economy:

• Stocks end little changed.
• Nasdaq logs 7th straight higher session.

U.S. stocks ended little changed yesterday although the Nasdaq, by gaining a mere 2 points, did post its 7th consecutive higher session closing at 6,314, just shy of its record close of 6,322 set on June 8th. The Dow lost 8 points to close at 21,630 and the S&P 500 ended literally unchanged at 2,459. As I like to say, “chatter.” One of the reasons for the lack of movement was because there were no significant economic reports released yesterday.

This morning the big news is that the Senate Republicans have given up on their effort to replace the Affordable Care Act, aka Obamacare. In a stinging defeat for Republican party leadership. Last night GOP Senators Mike Lee of Utah and Jerry Moran of Kansas said they would oppose the latest version of the GOP bill. This forced Senate Majority Leader Mitch McConnell to give up on bringing the bill to the floor for a vote knowing he doesn’t have the votes to get it passed. So what’s the implications? Here’s the domino effect. The Republican plan of replacing Obama care would have included cutting taxes which would then be spent on infrastructure investment positively impacting the economy. No Senate bill. No money for infrastructure spending.

An immediate effect of the failure of the Senate bill is the dollar has fallen materially vs. other currencies. The reason for this is because prior to today the dollar had an embed value on the fact taxes would be cut and infrastructure spending would be immediate and ample. Not going to happen now.

The stock market is taking the news reasonably well with the Dow down 54 points.

Oil

• Oil prices close lower first time in 6 sessions.
• EIA forecasts rise in shale production for August.

Oil prices closed lower yesterday for the first time in 6 sessions. WTI fell 52¢ to $48.02 and Brent lost 49¢ settling at $48.42. Shortly before the closing bell the EIA released its latest Drilling Productivity Report forecasting oil production from seven largest U.S. shale plays would increase for an 8th consecutive month climbing 112,000 bpd to 5.59 million bpd. This would put U.S. shale production at the highest level since record keeping began in 2007. That information coupled with news that Libya is now producing north of 1 million bpd left the bulls a little reluctant.

Supporting the market is China. They reported yesterday that crude production is down 5.1% from a year ago and that imports rose 14% to 8.5 million bpd cementing their position as the world’s leading importer. They also reported over the weekend that GDP grew at 6.9% in Q2 which was stronger than expected. Higher GDP, more energy consumed.

This morning oil prices are roaring back primarily on the weak U.S. dollar. WTI is up 59¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Weather models turn warmer.
• Speculative traders are “short.”

Yesterday morning’s weather forecast came in marginally warmer for the Midwest and Eastern regions of the country which brought in some buying resulting in the August Nymex contract closing up 4.0¢ at $3.020. The bulls got confidence from the latest CFTC report, which was released late Friday, that spec traders have the net smallest length on since mid-March 2016 and 42% shorter than the market’s recent net greatest length in mid-May. In layman’s terms, the boat is listing a little too much to the short side. Current prices have now rallied 24¢, 9%, from this month’s earlier 4 month lows.

In its aforementioned Productivity report, the EIA stated it expects natural gas production from the major U.S. shale plays to increase by 837 MMcf/d, 1.6%, to 52.9 Bcf/d in August marking a 7th consecutive month of higher production. The increase primarily will come from the Permian, Marcellus and Haynesville plays.

This morning natty is up 6.0¢ with a strong cash market being driven by well above normal temperatures in the Midwest and Northeast.

Elsewhere

Last Sunday passengers on an American Airline flight to the Raleigh-Durham airport were forced to leave the plane. Why? Someone “passed gas.” According to a spokesperson, the incident happened when passengers on the flight became ill with nausea and headaches. Authorities later said that the incident was a “medical call” and directed all questions to the Wake County EMS. American Airline officials said that a plane had an odor issue but denied it was because of “passed gas.” “We did have an aircraft from Charlotte to RDU this afternoon, that landed at 2:19 PM ET, and arrived at the gate at 2:21 PM ET, that is currently out of service for an actual mechanical issue – an odor in the cabin. But it is not due to “passed gas” as mentioned.” OK, who ate the beans?!