Good morning.  It’s been almost a week since the last Morning Energy Blog being I was travelling the last four business days with my last report last Monday reflecting Friday July 17th’s price action. As a matter of reference, on that day the Nasdaq closed at a record high of 5,201, the Dow was at 18,086 and the S&P 500 closed at 2,127. Giving it to you straight, it was a very, very ugly week with stocks falling the last four consecutive sessions. On Friday the Dow lost 163 points (0.92%) at 17,569. That was the good news for on the week the Dow lost a 401K killing 2.9%, its worst week since January. The other indexes fairly just as poorly with the S&P and Nasdaq falling even more than the Dow with the former down 22 points (1.05%) to 2,080 and the latter losing 57 points (1.12%) ending at 5.089. The S&P lost 2.2% on the week and the Nasdaq fell 2.3% over the same period. Quite frankly, it was the worst week of the year for the major stock indexes. On a more broader view, the Dow is now down 1.4% for the year.

What investors are seeing and scaring them are very weak commodity prices. Over the past few weeks I’ve occasionally commented on commodities (copper prices hitting multi-year lows) and the low commodity prices are striking fear in investors that global growth is slowing. As I mentioned a couple of weeks ago, China announced Q2 GDP at 7%, and no one believed it for the inputs to the GDP number were not reflecting that level of growth, including commodity prices. Investors’ fears were reinforced on Friday with Caixin releasing its Markit flash general manufacturing Purchasing Managers Index of 48.2 for China which is a 15 month low. Locally, the U.S. flash manufacturing PMI for July edged up to 53.8 but that was a bounce from a 20 month low hit in June. New home sales data was also released on Friday showing a decline of 6.8% in June which was a 7 month low but the glass is half full view is that earlier in the week data showed existing home sales hit a near 8 ½ year high. Also glass is half full is that new home sales, albeit lower in June, are still 20% higher than the same time last year. Now with equities purging one would think gold would rally (the old risk off move) but such is not the case with the shiny stuff closing down $8.60/oz. on Friday at $1,085.00 and posting 5 straight weeks of losses which hasn’t happened since last October. Where we are seeing the rotation to “risk off’ is in U.S. Treasuries with the 10 year closing lower on Friday at 2.271% and posting their largest two week decline since March 27th (lower yields mean more demand for the Treasury which is an economic safe haven).

This morning Chicken Little is out screaming the sky is falling, and it is, at least in China where the Shanghai index fell, buckle in now, a huge 8.48%. That’s equivalent to a whopping 1,490 Dow points! This is the biggest one day fall since 2007! Over the past month or so the Chinese government has been doing everything it can to support the stock market there, including halting one’s ability to sell stocks. You don’t have to be a rocket scientist to know that’s a mug’s game. The rumor in the market is that China is starting to pull back on measures to prop up the market there. Now remember that over the past 2 years the Shanghai was up an eye popping 150% and not even the most optimistic person out there can really expect those gains to be sustained. (Google George Soros vs. the Bank of England on supporting the British pound).

The contagion spread from Asia to Europe while you were sleeping with all the indexes down especially Germany’s DAX which is off 1.98% and France’s CAC down 2.10% as I write. Unsurprisingly, U.S. equity futures are much lower with the Dow down 103 points, 0.59%, and much better than the apocalypse surrounding us. By the way, CNN’s Fear & Greed Index is currently down in the single digits, 9, Extreme Fear.

Oil

On Friday WTI fell 31¢ closing at $48.14. Brent lost 65¢ settling at $54.62. Although Friday’s loss was fairly benign the week was bad for Texas Tea with it losing $2.75, 5.4%, and down 22% from its 2015 settle high of $61.43 in June. And this ignores WTI’s 2014 high of $108. The global rout in equities in conjunction with worries about a worldwide oversupply of crude are giving the bears plenty of fodder. Oil prices may be falling but the rig count has stabilized. Baker Hughes on Friday reported the number of oil rigs working in the U.S. increased by 21 for the week which is the largest weekly gain since February 2014. This is clear evidence US. producers are increasing efficiency and productivity. This morning WTI is off 39¢.

Courtesy of MDA Information Services LLC

Natural Gas

Natural gas prices fell marginally on Friday closing down 4¢ at $2.776. A week ago Friday natty closed at $2.870 so over the week it’s lost 9.4¢, 3.2%. In the broader sense prices continue to be drawn to the $2.75 to $2.80 area. Regarding the always important weather forecast, temperatures will be elevated through the eastern half of the country (the most important with respect to natural gas) this week which will elevate power burns and support natty. However, the 6-15 day forecast is pretty bearish showing very mild temperatures in the upper Midwest the first 10 days of August. This morning natty prices are keying off the cash market being up 2.4¢ as I write.

Elsewhere

I asked this question in the office and I bet you would answer the same as everyone here did. The question was “What were George Washington’s teeth made of?” The universal answer: “wood.” And it was wrong. It is a myth that our first president’s teeth were made of wood. Dental issues plagues Washington most of his adult life. He began losing his teeth as early as his twenties and was eventually forced to wear several sets of unsightly and painful dentures. Rather than wood, Washington’s many false choppers were made out of varying combinations of rare hippopotamus ivory, human teeth, and metal fasteners. By the time he took the oath of office he had only a single natural tooth left and wore a special set of dentures made of ivory, brass and gold built by his dentist. The reason folks believe Washington had wooden dentures is because of his dentist’s name. You see, George Washington did not have wooden dentures but Wooden dentures which was the shortened and abbreviated name of his dentist, John Greenwood.

Have a nice day.