Equities and the Economy

Yesterday was an extremely volatile day with the Dow having more than a 300 point swing! Before the U.S. open and while the European markets were trading ECB president Mario Draghi announced in his post-meeting press conference that basically the ECB was going “full monty” on QE which sent both European and U.S. stocks soaring and the euro diving. Then just a few minutes later he sucked the air out of the room saying that although interest rates would remain “very low” for long he doesn’t anticipate a need to cut rates further. About face! Retreat! That’s exactly what stocks did and the euro did (you need to see a chart of the Euro vs. the U.S. dollar). It traded in a 3.7% range which is absolutely insane!). It was an incredible whipsaw of a day but at the day’s end the stock indexes were little change. The Dow closed down 5 at 16,995, the S&P 500 flat to Wednesday at 1,990 and the Nasdaq finished of 12 at 4,662. As always needs to be mentioned of late, oil prices slid a little yesterday. It was almost as if oil prices trumped the ECB’s additional QE which is just stupid! By the way, the equities market is salivating over this latest round of QE because the ECB said that for the first time it will buy corporate debt. Previously, it only purchased sovereign debt. This is unequivocally bullish of European equities.

There was only one fundamentally based report yesterday was the Labor Department’s weekly jobless claims report. And it surprised to the positive side. The report stated that initial jobless claims last week fell by 18,000 from the week before to 259,000, a 5 month low. This was way better than economists were forecasting.

This Friday morning is beginning very well with the Dow rocking up a hefty 172 points. Asian stocks closed mixed but European equities are flying to the upside with Germany’s and France’s markets up over a whopping 3%. It’s bizarre but it’s as if investors needed a day to digest the ECB QE. Oh, oil prices are higher.

Oil

As mentioned above, oil prices slipped yesterday with WTI falling 45¢ closing at $37.84 and Brent down $1.02 to $40.05. Prices fell following a report that signaled a meeting of the major oil producers to discuss freezing production was “unlikely” to occur. But as is always the case, it’s new information that moves prices and the IEA (not our EIA) reported that it believes oil prices have bottomed and the low prices were beginning to impact crude production outside of OPEC. Uh, that would be U.S. production. The IEA’s report is popping prices this morning 79¢.

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA released its weekly storage report yesterday stating 57 Bcf was withdrawn from U.S. storage facilities last week which was markedly less than forecasts of 62 Bcf. And prices rose with natty closing up 4.0¢ at $1.752. Prices are now up 22¢, ~9%, in little more than a week. Guess what? It’s up 6¢ this morning. And this is with no weather load and storage levels at record highs. So I’ve been asked, “Why is this happening?!” Folks, I’ve seen this so many times before and the first time I saw it as a trader it caught me off guard. Traders are trading the future. That’s why it’s called a “future!” I call this the “spring rally” which I see every year, and it’s always unexpected to the layman. Folks, we just came off 15 year lows! It was a siren going off!

Back to storage, levels are 911 Bcf, 58%, above last year at this time and 727 Bcf, 9%, greater than the 5 year average.

Elsewhere

Everybody’s heard of the protagonist of Herman Melville’s novel Moby Dick. But did you know there was actually a real life Moby Dick. Only he was called Mocha Dick. In fact, Mocha Dick was one of two whales that inspired Melville. Mocha Dick was a massive 70 foot long albino sperm whale and named such because he was first sighted off the coast of Chile near Mocha Island. The latter “Dick” part of the name is thought to have simply been after the practice of naming certain deadly whales common names like “Dick” or “Tom.” Over approximately 28 year Mocha Dick earned a reputation as one of the most cunning and feared whales in the ocean. During that span he was spotted attacking at least 100 whaling ships successfully destroying about 20 and surviving encounters with another 80 or so. Mocha Dick finally met his downfall after observing a mother whale whose calf had just been killed by whalers. The mother turned on the whalers and attempted, unsuccessfully, to destroy their ship. Instead, she herself was harpooned and mortally wounded. Upon observing all this Mocha Dick decided to join the fray also attacking the whaling ship. He successfully destroyed one smaller whaling ship but was injured in the process by a harpoon and eventually killed.

Interesting facts:

While Moby Dick is considered a great work of literature, in its day it wasn’t successful earning Melville only $556.37 with less than 3,000 copies sold over the next 40 years or so before Melville died.

In the early 19th century a common name for whales was “Dennis.”

Mocha Dick’s body yielded around 100 barrels of oil. Over 20 harpoons were found embedded in his body after he was killed.

While Mocha Dick was fearsome with whaling ships, he left all other ships alone because he rarely attacked unless he was first attacked. He was even known to swim docilely around and alongside ships at times. As soon as the ship would try to harpoon him he would attack.

Mocha Island is a small island about 19 square miles in size located off the coast of Chile. It was famously used by such people as Vice Admiral Sir Francis Drake and Oliver van Noot as supply bases. The former you’re familiar with, the latter was the first Dutchman to sail around the globe.