Equities and the Economy
Friday was an exceptional day for U.S. equities with the S&P 500 breaking through another resistance level. The Dow rose a big 218 points, 1.3%, ending at 17,213, the S&P 500 rose 33 points, 1.6%, breaking through and closing above the resistance of 2,008 at 2,022 and the Nasdaq advanced 86 points, 1.9%, to 4,748. For the week the Dow and S&P were up 1.1% and the Nasdaq up 0.7%. The Dow and S&P closed at their highest level this year and all three indexes posted their 4th consecutive gain. The combination of rising oil prices, which got support from an EIA report stating they believe prices have bottomed, and the tailwind given by the ECB announcement of a larger than expected QE gave the bulls confidence and bringing in buyers.
There were no economic reports of significance released Friday so let’s talk about today and this week. The major Asian indexes closed around 1.7% higher playing catchup to U.S. equities. Japan’s market got good news in that machinery orders jumped 15% m-o-m in January. The European indexes are also trading nicely in the green but the love is not spreading to the U.S. with the Dow down marginally, 30 points. It’s going to be a central bank bonanza this week. We had the ECB last week and this week we have the Bank of Japan meeting tomorrow, our FOMC on Wednesday and the Bank of England and Swiss National Bank on Friday. Whew!
On Friday WTI rose 66¢ closing at $38.50 and Brent added 34¢ settling at $40.39. Although the gains on Friday weren’t large it was a good week for the oil bulls with prices up 7%. The bulls certainly weren’t hurt with Goldman Sachs on Friday jumping on the bandwagon saying they too believe oil “price lows may have been set.” Iran is throwing some water on the rally this morning stating over the weekend it would only join the production freeze once its output hit 4.0 million bpd. Production in February was 2.9 million bpd so you can see it’s got a ways to go to hit the 4 million bpd level. This is pushing down prices with WTI down $1.16 to start off the week.
Baker Hughes released its rig count report on Friday stating another 6 oil rigs were laid down last week with the total oil working rig count now 866, the lowest since December 2009. Last year at this time there were 866 oil rigs working. The working rig count for both oil and natural gas is 480, an all-time low since record keeping began in 1975.
On another note, have you seen how gasoline prices have popped. I filled up yesterday and the price was 20¢/ gallon more than the last time I filled up.
Natural gas prices rose for the 6th straight day with the April contract adding 3.4¢ closing at $1.822. Prices have rallied 25¢ over the last 5 sessions and to a 3 week high bouncing off this month’s earlier 18 year low at $1.611. However, we’re now in the 1.80’s and my forecast is that gains are going to be more slow in coming. This week temperatures across the eastern half of the country are way above normal. Air conditioners will be running in Houston with an expected high of 88 and 87 over the next two days testing record highs before settling back to more normal temperatures. The 11-15 day forecast is showing temperatures for the eastern half of the country to be slightly above normal and then we’re into April! It’s looks like pretty much no load conditions for the next couple of weeks.
All winter long I’ve been mentioning that natural gas consumption in the electric generation sector has been at record highs. The trend continues. Bentek, a respected research group, forecasts power sector demand this month to average 25.1 Bcf/d, up nearly 3.0 Bcf/d, 13.6%, from a year ago.
This morning natty is unchanged from Friday’s settle.
If you’re anything like me, you like daylight saving time (DST). That being said, the alarm came real early this morning. Every second Sunday of March we turn our clocks forward one hour and eight months later turn them back. So where did this whole concept of daylight saving time come from anyway? First though, did you note it is “saving” time and not “savings” time? Yes, “saving.” The intention behind implementing DST was to conserve energy and increase our active daylight hours. Except for Hawaii, most of Arizona and overseas territories, the U.S. and about 70 countries have DST, which is also known abroad as “Summer Time.”
Germany was the first country to observe DST, in 1916 during WWI, in order to conserve coal. The practice then spread to other European countries and the U.S. After WWII it was up to the individual states to decide if they wanted it or not. The Uniform Time Act of 1966 established consistent start and end dates. As part of the 2005 Energy Policy Act four more weeks were added to DST which went into effect in 2007.
Although I am, not everyone is a fan of DST (I would be happy if we never switched off DST). In 2014. 43% of Americans said they didn’t think there was a need for it. Whether there is a need for it is up for debate. A study by the Department of Energy stated that DST only saves 0.03% annual savings. Other concerns mentioned are sleep deprivation and associated risks, like car accidents and workplace injuries. Proponents say the opportunity for an extra hour of outdoor activity during the DST months is good for our health and provides a boost to tourism, retail and recreation industries.
All I can say is you now can get that nine in after work!