Equities and the Economy:

• U.S. stocks closed mixed after AHCA bill is pulled.
• Investors selling this morning.

Donald Trump found out on Friday there’s a big difference between being an obstructionist and having to govern. Knowing he didn’t have the minimum number of votes, on Friday afternoon House Speaker Paul Ryan pulled the AHCA bill resulting in a major defeat for the Trump Administration. As a matter of background, stock P/E ratios have been at lofty levels with investors optimistic about health care reform, tax reform and fiscal spending, aka, Trump trade. Health care reform was less an economic matter but more of a demonstration of whether President Trump could get Republicans to follow him thereby giving investors more confidence about positive changes to tax reform and fiscal spending. Well the Freedom Caucus, a group of about 30 representatives, refused to go along with President Trump and Paul Ryan and with not one Democrat in favor of it, the bill failed. This is the same group that was a major thorn in the side of former House Speaker John Boehner. I watched the market action closely thereafter seeing how investors would react to the defeat and U.S. stocks weathered the President’s set-back pretty well. The Dow closed down 60 points at 20,597, the S&P 500 was off 2 points at 2,344 and the Nasdaq actually finished 11 points higher at 5,829. However, it wasn’t a good week for your 401K. For the period the Dow lost 1.5%, its largest weekly loss since September, and the S&P fell 1.4%, its biggest weekly loss since November. The Nasdaq fell 1.2% for the week, its largest drop since December.

We need to move on to this morning for investors had the weekend to mull over what President Trump’s defeat meant, and they don’t like it. The Dow is down 167 points. Movement in stock market prices don’t happen in a vacuum and we’re seeing the impact in other markets. The U.S. dollar is the weakest it’s been in 4 months and gold is at a one month high. This is still a bull market folks but this looks like the pullback that’s long overdue.

Oil

• Oil prices post marginal gains on Friday.
• Prices log 3rd weekly loss in a month.

While oil prices managed to log small gains on Friday with WTI closing up 27¢ at $47.97 and Brent adding 24¢ ending at $50.80, it was another bad week for producers with oil posting its 3rd weekly loss in a month. For the week WTI oil futures lost 1.7%. Baker Hughes released its rig count report on Friday and it continues to grow. Last week the oil rig count grew a hefty 21 while the natural gas rig count fell by 2. The oil rig count is up to 652 which is over double what it was last May when it was at its nadir. The oil rig count has risen every week this year except for one.

This morning WTI is down 74¢ being dragged lower on weak equities.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices post small gain on Friday.
• Fundamentals are supportive.

Natural gas prices logged a small gain on Friday with the April contract closing up 2.5¢ on Friday at $3.076 and at 6 week highs. The fundamentals are supportive: LNG exports are 8 times higher than this time last year, Mexican exports are up 21% y-o-y, there’s 16% less gas in storage than this time last year and U.S. natural gas production is down 3% y-o-y. Further, although we’re going into the shoulder period of the year with lower fundamental heating and cooling demand, there will be 44% more MW’s of nuclear power off line for maintenance this year compared to last year over the next couple of months. On the bearish side, with tax credits still in place there are a significant amount of renewable (wind and solar) MW’s coming on line this year. Also, the higher prices go, the more market share coal will capture in the electric generation sector.

Bid week starts today which is where the physical buyers and sellers come out buying and selling for the month of April so we’ll see how this all plays out over the next few days. The April Nymex contract expires on Wednesday. This morning traders are pushing it a tad higher up 2.2¢

Elsewhere

With it being Monday and the stock market materially weaker I thought you could use a smile this morning.