Equities and the Economy:

• U.S. stocks close flat to Wednesday.
• Yesterday marked the 8th anniversary of this bull market.

Yesterday U.S. equities closed basically to Wednesday’s levels with the Dow adding 2 points to 20,858, the S&P 500 edging up the same amount to 2,365 and the Nasdaq rising a single point to 5,839. Truly chatter, but good we didn’t lose ground because Tuesday and Wednesday were down days. The resilience of the stock market is nothing short of amazing! We have gone for over 4 months now without a decline of 1% for the Dow or S&P. That is 102 trading sessions dating back to October 11th. Such a preternatural period is historic. The last time this happened was in 1995 for the S&P and 1993 for the Dow. Statically, the stock market declines once every 6 trading sessions. Yesterday marked the 8th anniversary of this bull market basis the S&P. The index marked its low March 9, 2009 and is up a whopping 249% since that point! The combination of the Fed’s ultraloose monetary policy (QE) and the strengthening economy have been equities fuel. Cheap money is coming to an end. The Fed is going to have to walk a fine line between raising interest rates to manage the economy and avoiding raising too much and slowing growth. There’s been many cases in history of the Fed raising interest rates and a recession following.

The big news for the day is out and that’s the Labor Department’s employment situation report for February. The headlines are that 235,000 jobs were added last month, greater than the forecast of 221,000, and the unemployment rated dropped to 4.7% from 4.8%. The report also showed wages rose 0.2% m-o-m and 2.8% over the prior year which is fastest pace in 8 years. January’s earnings figures were also revised up to 2.8%. The Fed would be crazy not to raise interest rates next week.

Investors kinda like what they see. The Dow is up 21 points.

Oil

• Oil prices continue to fall.
• Prices at 3 month lows.

After falling 5.4% on Wednesday oil prices added to their losses yesterday falling 2% finishing under the key support level of $50. WTI logged an even dollar loss closing at $49.28 while Brent settled down 92¢ at $52.19. For the last 3 months WTI has traded between $50 and $55.25 and now that support has broken. When that happens the previous support now becomes resistance. The next support is $48.68 which is the 200 day moving average. A combination of the resilience of the U.S. shale producer, U.S. production above 9 million bpd for 3 weeks now and a massively overbought market (for the week ending February 21st the long positions were at a record) opened the door for the price fall. Traders have been closely following the events at the CERA conference this week here in Houston and the Saudi energy minister’s comment that there will be “no free rides” with respect to non-OPEC oil producers implying OPEC, i.e. Saudi Arabia, is unwilling to lose more market share as it works to rebalance the market was bearish. And this may be the coup de gras. Reuters reported that Saudi energy officials told top independent U.S. oil firms this week not to assume OPEC will extend the production cuts beyond June. That’ll slay a bull.

This morning WTI continues to get hit being down 44¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Cold weather supporting prices.
• Prices have rallied 50¢, 19%, over last 2 weeks.

For the next 6 or 7 days temperatures are going to be very cold in the entire lower and upper Midwest as well as from Virginia to Maine. In eastern Canada temps will be super below normal for the same time frame (lots of dark blue and purple on the map!). This is driving a stronger cash market which is driving futures prices higher. Yesterday the April contract closed up 7.3¢ at $2.974. Prices are 19%, 50¢, over just the last couple of weeks.

Also supporting prices yesterday was the EIA’s storage report showing 64 Bcf was withdrawn from storage last week. The market was expecting a withdrawal of 54 Bcf. Currently storage levels 8% below last year and 19% above the 5 year average.

Higher natty prices are resulting in more electricity being generated by coal. The EIA reported yesterday U.S. coal production increased 14% vs. a year ago. In addition, the Association of American Railroads reported coal carloads in the week ending March 4th are up 19% from a year ago and up 16% above year ago YTD levels.

This morning it’s very quiet. Natty is up 06¢.

Elsewhere

Interesting events on this date:

49 BC – Julius Caesar crossed the Rubicon and invaded Italy.

1876 – Alexander Graham Bell made his first successful call with the telephone. He spoke the words “Mr. Watson, come here, I want to see you.”

1893 – New Mexico State University canceled its first graduation ceremony because the only graduate was robbed and killed the night before.

1913 – William Knox rolled the first perfect 300 game in a bowling tournament.

1971 – The U.S. Senate approved an amendment to lower the voting age to 18.

1994 – White house officials began testifying before a federal grand jury about the Whitewater controversy.