Equities and the economy

As I expected, with the European markets closed it was a quiet day on Wall Street yesterday. The Dow closed up 20 at 17,535, the S&P 500 rose a single digit to 2,037 while the Nasdaq fell 7 finishing at 4,767. Yesterday about 5.1 billion shared changed hands on U.S. exchanges, well below the 8 billion average. Additionally, the Dow traded in a 91 point range, the narrowest since last Christmas Eve.

The Commerce Department reported yesterday that consumer spending in February rose 0.1% with personal incomes rising 0.2%, but strangely wages and salaries fell 0.1%. That data is definitely confusing. The National Association of Realtors reported its index of pending homes sales rose 3.5% to 109.1 in February which is the highest this index has been since last July and way above economists’ expectations. As I’ve mentioned previously, supply/inventory is the issue and new listings are being scooped up as soon as they hit the market. The housing market has been the backbone of the U.S. economic recovery, and continues to be so. Finally, the Dallas Fed released its General Activity and Production Indexes. Both has been negative last month at -32 and -9, respectively. Considering where oil prices have been and are, the indexes came in surprisingly strong for March at -14 and +3, respectively.

Dow futures are lower this morning being down 58 points. The Asian markets ended mixed and the European markets, which are trading for the first time this week, are the same on either side of unchanged. The big event today is our Fed Chairperson, Janet Yellen, speaking at the Economics Club in New York City with investors looking for insight into interest rate policy. She will deliver a prepared speech followed by Q&A. This is always a highly anticipated event. One thing I guarantee you she will say is that “The Fed is data dependent.”

Oil

Like equities, oil was moribund with WTI closing down 7¢ at $39.39 and Brent off 17¢ at $40.27. Chatter. Barring some other “main event,” the market is biding time for next week’s OPEC-non-OPEC meeting in Doha to discuss freezing production levels at January rate. That being said, Saudi Arabia is the only one that counts for everyone else will, regardless what they say, will produce every drop they got. Even Russia whose economy has been in recession of late due to low oil prices and the embargo. Nothing’s changed in 40 years. Of course the meeting will go on without the world’s 3rd largest producer of crude, the U.S., so there’s an interesting dynamic, and don’t forget, Iraq is not attending and Iran is not being held to the quota.

This morning WTI is getting hit pretty hard being down $1.27, but it’s done this recently in the morning only to recover in the afternoon. By the way, you bulls out there be careful. While the open interest in WTI is fairly balanced now between longs and shorts, data shows that as of March 22nd long bets in Brent are the highest since ICE records began in 2011 (the Intercontinental Exchange is a platform similar to NYMEX).

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices crept higher yesterday settling up 4.2¢ at $1.848. The calendar 2020 and 2021 strips were up over 6¢ which is a very material move for contracts so far into the future. Possibly a big consumer is hedging. Not sure, but that’s a big move. Today will be the April 2016 Nymex contract’s last day of existence, meaning it will expire setting the price of April electricity for those of you with unhedged heat rate electricity supply agreements and April natural gas supply for those with Nymex + basis agreements. Natty is trading down 2.1¢ as I write. By the way, nothing material weather wise.

Elsewhere

Outer space is a giant airless vacuum. But does it smell??? It may be a giant airless vacuum, but astronauts swear it has an odor. Those who have sniffed the aroma liken it to burning metal, steak or welding, among other peculiar olfactory memories. Per NASA astronaut Scott Kelly, “Whenever a device docks, the smell of space when you open the hatch is very distinct.” Kelly is not alone in his observation. Astronaut Don Pettit described what fellow crew members smelled like when the returned from space walks. “It was more pronounced on fabrics than on metal or plastic surfaces. It had a metallic scent, like the fumes from an arc welding torch.” Here’s NASA’s explanation. Materials once exposed to the vacuum of space, such as polycyclic aromatic hydrocarbons (Google that one!) floating around in space, can react strongly with oxygen pumped into a spacecraft. When you burn materials in air, the same process occurs – oxidation – just at a much faster rate. This might help explain the “burnt” character of the smell.