Equities and the Economy:

• S&P 500 and Nasdaq close at record highs.
• Trading volume very low.

U.S. stocks shrugged off concerns of the failure of Senate Republicans to push through a healthcare bill with both the S&P 500 and Nasdaq posting new record highs. The former did so barely edging up a single point to 2,461. The tech heavy index posted its 8th consecutive gain closing up 30 points, 0.5%, at 6,344 driven higher by Netflix which soared 13% after it released Q2 earnings and guidance. The Dow fell 55 points, 0.3%, dragged lower by Goldman Sachs Group whose stock price fell 2.6% after it released earnings showing a 40% decline in an important segment of its trading business.

A word of caution here. Market price moves, both up and down, need a descent amount of volume traded to confirm a move. Otherwise, price moves can be false signals. We have not had that lately. Summer trading volume has gone from a slowdown to a near halt as the major indexes log record highs. For example, this past Monday 2.76 billion shares traded compared to a y-t-d average of 3.48 billion shares. And Monday was better than Friday when only 2.71 billion shares traded, the lowest volume day of the year. Now I’m not saying I’m a bear, but my antennae are up.

The dollar hit a 10 month low yesterday vs. a basket of currencies, which is positive for stocks. A weaker dollar makes U.S. exports cheaper to foreigners.

Regarding fundamental data, our government reported that both import and export prices fell in June from May. Import prices were down 0.2% m-o-m and are up 1.5% for the year. Export prices were also -0.2% m-o-m and up only 0.6% for the year. This is not what the Fed wants to see as it desperately wants inflation to get to its 2% target.

Disconcertingly, the National Home Builders reported its housing index for July fell to 64 from June’s 66, which itself was revised down from 67. The housing industry has been the backbone of the recovery. Let’s hope this index stabilizes.

This morning the market is basically flat to yesterday’s close with the Dow up 6 points. The Nasdaq is looking to continue its rally for a 9th session being up 20.

Oil

• Prices get a boost from a weak dollar.
• Saudi Arabia considering cutting supplies further.

The aforementioned weak dollar is benefiting all commodities priced in the greenback, including oil. WTI edged up 38¢ to $46.40 and Brent added 42¢ settling at $48.84. Bullish news came from the Financial Times which reported that Saudi Arabia is considering cutting an incremental 1 million bpd of crude exports in response to higher output from Libya and Nigeria. You bulls be cautious. OPEC producers are getting more and more frustrated that the agreed upon production cuts are not yet balancing global supply and demand. OPEC compliance, although still very high at around 90%, is the lowest since the agreement commenced. Further, Ecuador just announced they are no longer going to curtail production. It had agreed to cut 26,000 bpd and while the country’s production is only 1.6% of the cartel’s total production, it sends a clear signal of member frustration. The next scheduled OPEC meeting is in November. It’ll be a very interesting meeting.

This morning WTI is quiet up 18¢

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices continue to creep higher.
• Strong seasonal demand and record exports.

Natural gas closed up 6.8¢ at $3.088/MMBtu yesterday driven by strong seasonal demand (much above normal temps in the Midwest and east this week) and record Mexico and LNG exports. This is the highest price since May 30th. Front month natty prices have now rallied 27¢, 9%, over the past 2 ½ weeks.

U.S. dry natural gas production is rebounding. For about the first 5 months of the year production averaged about 70.7 Bcf/d. For the last 7 days its average 72.5 Bcf/d, which is 0.4 Bcf/d greater than the 2016 average. No doubt the pipeline expansions that have been slowly coming into operation in the northeast are relieving some of the production constraints allowing this gas to get to market.

All quiet this morning. Natty is flat to yesterday’s close.

Elsewhere

Got to hand it to the Chinese. They know how to make a “huggable” solar plant. Hong Kong based Panda Green Energy just announced they connected their 50 MW solar power plant to the grid. And it’s shaped like Chinese pandas! (see picture). The plant is located in the city of Datong, which is in the norther Shanxi province, and covers about 247 acres. This is the first phase with the second phase being another 50 MW’s. Upon completion of the entire project, the 100 MW plant will provide 3.2 billion Kwh of electricity over 25 years, the equivalent of about 1 million tons of coal.