Equities and the economy
It was another choppy day on Wall Street, although the Dow did snap a seven day win streak closing down 41 points at 17,583. The S&P 500 dropped 2 to 2,049. All just flesh wounds (Monty Python’s Black Knight lives!) On the back of healthcare stocks the Nasdaq closed 13 points higher at 4,822. Considering the terrorist attacks in Brussels the markets performed well. Is terrorism so common now that markets and investors are becoming numb to them? I guess one answer is it depends on the circumstances surrounding the terrorist act. With the markets closed this Friday I expect another couple of quiet days not only because of the holiday but, and I said this before, S&P 500 P/E ratios are getting lofty again and buyers may be reluctant to jump in at current levels. However, equities are lofty, not apogee.
Turning to the economic data, Markit Economics reported its flash index of manufacturing purchasing managers is 51.4 for March, up slightly from February’s 51.3. Economists were forecasting 52 so we’ll call this spot on. While this index was neutral the Richmond Federal Reserve (Virginia and surrounding states) manufacturing index was positive, actually shockingly positive. The index came in at +22 after last month’s -4 with expectations of unchanged. This was the highest reading for this index since the spring of 2010 and the largest month-on-month gain in the 23 year history of the report. Expect a revision to this index next month.
Overnight the Asian markets closed flat to marginally lower on profit taking because of Brussels although the losses were nothing substantial. The European markets are bouncing back from closing lower yesterday due to the Brussels event being up 0.14% to 0.92% as I write. Here in the U.S. it’s more of what we’ve had Monday and Tuesday with Dow futures down 55.
It seems like that oil/equity correlation is still intact, although I’m not sure which is driving which, for just like equities yesterday, oil prices were moribund with WTI closing off 7¢ at $41.45 and Brent up 25¢ at $41.79. Chatter. Moving on to this morning, WTI is trading 89¢/bbl lower on yesterday evenings API report showing a much larger than expected build in crude stockpiles, 8.8 million barrels, which is triple the average increase for this week over the past 5 years. Mitigating this somewhat was that gasoline and product inventories (diesel, heating oil, jet fuel) fell a whopping 4.7 million barrels which was 2 million more barrels than the 5 year average. As I’ve written previously, gasoline demand is extremely strong currently with prices so low. Amazing how markets work, if you just let them (where are those cries of speculation pushing prices too low?!)
After posting a loss on Monday natural gas prices rebounded 3.5¢ yesterday closing at $1.863, although not capturing back the entire loss. That being said, it’s impressive natty is trading $1.90ish considering we’re going to exit the winter season with a record amount of gas in storage. No doubt traders are focusing on the forecast for a warmer than normal summer, flat production and increasing demand from electric generation, exports to Mexico, industrial demand and LNG exports.
Very mild temperatures are forecast for the next 10 days for the eastern 1/3rd of the country resulting in no-load conditions, but a pretty health cool shot is coming into the Midwest at the beginning of April. This morning natty is up 2.1¢.
Here’s something really cool. The Norwegian Academy of Science and Letters has decided to award its Abel Prize for 2016 to Sir Andrew J. Wiles (62) from the University of Oxford. The Abel prize recognizes contributions of extraordinary depth and influence to mathematical sciences and has been awarded annually since 2003. It carries a prize of $700,000.
Andrew J. Wiles is one of very few mathematicians, if not the only one!, whose proof of a theorem has made international news. In 1994, he cracked Fermat’s Last Theorem, which at the time was the most famous unsolved problem in the subjects history. So how impressive was his work? Well the theorem went unproved for three hundred years! Now that’s impressive! Wiles’ proof was not only the high point of his illustrious career, and an epochal moment for mathematics, but was also the culmination of a remarkable personal journey that began three decades earlier. In 1963, when he was 10 years old he found a copy of a book in Fermat’s Last Theorem in his local library. Wiles stated that he recalled he was intrigued by the problem that as a young boy he could understand, and yet it remained unsolved for so long. “I knew from that moment that I would never let it go. I had to solve it.” Not quite the same thing I was doing at 10, which came with a lot of scrapes and bruises!