Equities and the Economy
Good morning and happy National Chocolate Éclair Day. I was travelling last week and the last Morning Energy Blog was Tuesday reflecting Monday’s market action so let’s see what transpired since that time. Last Monday the Dow, S&P 500 and Nasdaq closed at 17,791, 2,084 and 5,030. On Friday the Dow closed at 18,016, down 100 points on the day. The S&P ended at 2,110, off 11 and the Nasdaq closed at 5,117 down 16 from Thursday when it set a record high of 5,133. Overall the week was pretty good with the Dow rising 0.6%, the S&P posting a 0.8% gain and the Nasdaq was up a sweet 1.3%. Last week’s gains were fueled by Dr. Yellen’s led Federal Reserve communicating to investors they needn’t fear a sharp rise in interest rates.
Other than the Fed’s comments it is Greece that is dominating the news. There’s been a stalemate for 4 months in the negotiations with nasty words being slung back and forth between Greece and the Brussels group recently. Today there is almost a state of euphoria. This morning the Greek government submitted to its creditors a set of proposals which included a major concession on reforming its pension system bringing the Greek budget forecasts closer to the target demanded by its creditors. It’s now in the hands of the technical experts to “scrub” the numbers. Many European leaders have gone on the record today stating these latest proposals from Greece are an extremely positive step and are a “good basis for progress.”
The European markets are thriving on the good news with all the major indexes surging higher led by Germany’s DAX and France’s CAC 40 which are up a huge 3.42% and 3.47%, respectively. And the enthusiasm is rippling across “the pond” to the U.S. with the Dow up a very nice 172 points. U.S. stocks are also getting a boost from all the recent merger and acquisition talks including Cigna/Anthem and an uninvited offer to acquire the Williams Companies by an unnamed company but rumored to be Energy Transfer. As I’ve stated on numerous occasions, the stock market loves M&A activity. It appears the drawn-out economic recovery is finally generating some confidence in boardrooms and maybe even more importantly, companies are coming to understand debt is super cheap right now and with the Fed soon raising interest rates there is now an urgency to act.
Last Monday WTI closed at $59.52 and Brent settled at $62.61. On Friday WTI closed at $59.61, almost exactly where it was last Monday. Brent was a little stronger settling at $63.02 on Friday. Taking a “forest rather than trees” view, oil really went nowhere last week. The July WTI Nymex contract expires today and although it’s early, is doing so on a weak note being down 41¢. That all being said, we’re in a trading range from $56.55 to $62.58 since late April. This is after hitting over $100 about a year ago and then plummeting to below $42.50 in the middle of March. Kind of surprising WTI is down today with equities so strong this morning.
With Greece dominating the headlines lately you probably have forgotten but June 30th is the deadline for the U.S./Iranian nuclear talks. The following sure won’t help the which is a report the Iranian parliament is set to pass a law that would ban international inspections of its military bases and require the immediate lifting of all international sanctions. Not the best overtures to transmit if you want progress in my opinion.
The July natural gas Nymex contract closed at $2.899 on Monday. On Friday it settled at $2.816, up 3.6¢ on the day. Not much movement but In between those days though we had some volatility pushing prices above $2.90 for the second time this month and then dropping them backing to just above $2.700. This morning natty is down 8.3¢ and no doubt what the driver is. Take a look at the forecast. Yes it’s hot this week but the 6-15 day forecast is a CDD killer.
I’ve been telling you that the power sector has been sucking up natty this year. Well here’s a piece of critical data. Last week the U.S. power burn hit a 2015 high of 31.4 Bcf/d. That set a record for the earliest time of the year where power burn has been over 31 Bcf/d. Population weighted CDD’s more than tripled in the Midcontinent last week from the previous week and nearly doubled here in Texas (I can attest to that. It’s hot!)
I’ll bet you’ve never heard of Fred Canfil. He was a two-bit political functionary from Kansas City. According to the FBI, he was “a loudmouthed, profane, vulgar and uncouth person.” This is why people are so surprised to hear it was Canfil who singlehandedly molded America’s perception of one of its presidents. Notwithstanding the fact he was coarse and crude, Canfil caught the eye of one respectable politician who also happened to be the presiding judge of the county court in Jackson County, Missouri. You see, Fred and the judge had served together in WWI and after being elected to the bench the judged hired him as at tax investigator and despite Canfil’s unsavory reputation they became friends. In time the judge and Canfil went their separate ways and the latter rose to the of position of U.S. marshal for the western district of Missouri. On one occasion Canfil’s job took him to the federal prison in El Reno, Ok and while talking to the warden Canfil made an admiring comment about the sign on the warden’s desk and mentioned he had a friend who would love it. The accommodating warden said “No problem.” The head of the prison’s paint shop had designed the sign and it was easy to make another. The warden promised to send the duplicate sign to Canfil as soon as possible. When Canfil received it he gave it to his friend, the former judge from Kansas City, and in so doing Fred made a contribution to folklore that will live forever. You see, Canfil’s longtime friend was Harry Truman and the sign he gave the president contained four words that would define Truman’s legacy. It read “The buck stops here.” And that is how an unlikely political hack found the phrase that captured Truman’s sentiment and the president embraced it, even if it did come from a prison’s paint shop. Have a good day.