Equities and the Economy:

• U.S. stocks post best day of 2017.
• Dow closes above 21,000 for the first time ever.

WOW! What a day! Not only did all the major indexes close at record levels, they did it in grand fashion! The Dow broke through the 21,000 barrier surging 303 points, 1.5%, to close at a record 21,116, the S&P 500 rallied 32 points, 1.4%, finishing at a record 2,396 and not to be left behind the Nasdaq jumped 79 points, 1.35%, ending at 5,904 also a record. For the year the Dow is up 6.9%, the S&P is up 7% and the Nasdaq is up a whopping 9.7%! Folks, this is truly, truly amazing! Investors are pointing to two reasons for the big rally. First, President Trump’s speech Tuesday night, which I’m sure many of you saw or read about, and second, and something you most likely didn’t hear about, Treasury Secretary Steven Mnuchin’s comments on the same day that he expects a tax reform bill to be passed before August. Both the speech and Mnuchin’s comments were lovely music to investors’ ears.

Then there was the fundamental economic news which was certainly positive. The ISM reported that its index of manufacturing sector activity rose to 58 in February from 56 in January. So what does that mean? That just happened to be the fastest rate of expansion in over two years! Also, the Commerce Department reported that consumer spending rose 0.2% in January. The same department reported that the personal consumption index (PCE) rose 0.4% for January and 1.9% for the 12 month period. Remember, the PCE is the Fed’s preferred inflation index and note it’s close to the Fed’s 2% target. Regarding housing, prices are rising fast! Standard & Poor’s reported that it national index of home prices rose 5.8% in December. That the fastest rate of growth in 30 months. Low inventories and rising mortgage rates are pushing prices up.

The current FOMC is definitely a “dovish leaning” group but they cannot ignore all the positive economic data. The economy is in quite good condition and the Fed needs to “take its foot off the monetary gas pedal.” Folks, an interest rate hike is coming, probably this month, with more to come.

This morning the Dow is up 29 and the S&P flat. Breather.

Oil

• Oil prices little changed yesterday.
• This morning getting bludgeoned.

Let’s get yesterday out of the way for all the action is this morning. WTI lost 18¢ to $53.83 and Brent fell 15¢ to $56.36. This morning oil is getting whacked. WTI is down $1.05. Now before we get too excited even with that drop it’s at $52.78. Very close to $53 and well within the trading band of $50 and $55.25. The weight of the bull’s yoke is coming from increasing production for Iran, Iraq and Libya, who are excluded from the OPEC agreement, and the U.S where production is over 9 million bpd and that hasn’t happened for 10 months. Additionally, everyone in the world sees the U.S. economy is getting stronger and knowing interest rate hikes are imminent which strengthens the U.S. dollar (it’s at a 7 week high). We all know that a stronger U.S. dollar is bearish for commodities priced in U.S. dollars.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices bounce from March’s low settle.
• EIA releasing weekly storage report today.

The April contract closed up 2.5¢ yesterday at $2.799. Although both March and April are “shoulder months,” April is trading materially higher, 17.2¢, higher than March’s settle. The back months are still strong. Traders believe prices will rise. The calendar 2018 strip is $3.00 and, interestingly, the calendar 2019 through 2022 are all very close to $2.86. The March contract got pounded solely on the record warm February and weather adjusted prices should be above $2.60ish. I keep saying this but remember, U.S. natural gas production has declined 3.8% y-o-y. That’s not an insignificant amount amigos.

Elsewhere

Today’s the big day for Snap Chat. It’s IPO is today. The company will soon raise about $3 billion and its ticker will be “SNAP”. 158 million people use Snap Chat every day, and they’re hooked. They use the app an average of 18 times a day! However, similar to Twitter, Snap’s rate of growth is slowing. Users grew a respective 60% and 66% in the first two quarters of 2016 but only 55% and 46% the last two quarters. And it’s losing a ton of money. It lost $37 million in 2015 and $514 million in 2016. However, revenue grew tremendously. It was $58 million in 2015 and skyrocketed to $404 million in 2016. What’s really interesting to me is that in Snap’s prospectus it calls itself a “camera company,” not a social network. I can attest to its popularity. My teenage girls most used app, but teenagers have no app loyalty. They never use Facebook anymore. They think it’s only for old people.