Equities and the Economy:

• Stocks close lower for second consecutive day.
• Market in consolidation.

U.S. equities closed lower for a second consecutive day with the Dow off 30 points to 20,925, the S&P 500 ending down 7 points at 2,368 and the Nasdaq falling 15 to 5,834. Yesterday was the first time we’ve had consecutive losses in more than a month, but the losses are really small considering the big run-up we’ve had. Consolidation or a pullback is warranted, especially with two big events on the horizon. The first is Friday’s Labor Department employment report for February and the second is the FOMC meeting next Tuesday and Wednesday. Regarding the former, it’s expected to show the labor market continues to be “healthy.” The key term here is “expected.” Regarding the latter, an interest rate hike is all but a “given” for the market is pricing in a 90% probability of it. Hence, investors are cautious and see no reason to go “all in” at this time. Remember, higher interest rates are not good for equities for the higher bond yields that result “steal” money from the equity markets. Higher U.S. interest rates and yields though are tempered for the ECB, PBoC and BoJ are still in full monetary accommodation mode which is fodder for equities.

The major report yesterday was the Commerce Department’s report on the U.S. trade deficit. Imports rose 2.3% and exports rose 0.6%. The take away: both imports and exports rose which is indicative of a healthy economy.

ADP just released its private sector employment report and it was super good! The headline number was that private employers added 298,000 jobs in February which is the greatest since April 2014. Drilling down was more good news. The report also suggested there was growth in not low paying jobs but well-paying fields like construction, professional and business sectors. The ADP report is considered insight into Friday’s Labor Department Report. This gives the Fed even more cover to raise rates.

The market is taking the ADP report ho-hum. The Dow is down 15 points. Chatter.

Oil

• Static prices.
• API report shows big build in crude but big drawdown in gasoline.

More of the same. Nothing. WTI closed down 6¢ at $53.14 and Brent was off 9¢ at $55.92. Yawn. API’s weekly crude and products report was quite interesting last evening. It showed that crude inventories rose a whopping 11.6 million barrels last week compared to expectations of only a 1.6 million barrel build. However, gasoline and distillate, which is primarily diesel, stocks fell much greater than expected. In aggregate stocks rose about 2.6 million more barrels than forecasts which is putting some pressure on prices this morning for WTI is down 49¢. Interpreting the API data is that it looks like refiners are in full spring maintenance mode which includes modifying operations to produce summer blend gasoline which is less polluting.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas price retreat.
• This morning popping.

After rising 7.4¢ on Monday the April Nymex contract gave back almost the exact same amount closing down 7.7¢ yesterday at $2.824. This morning the bulls are again out in force pushing natty up 8.1¢. Prices are being driven by the cash market with folks out buying incremental volumes in preparation of the cold snap hitting the upper Midwest and Northeast. Temperatures from Washington DC north are going to be 13 to 17 degrees below normal this weekend with a major cold shot following. Front month prices this morning are for the second time in the past week above $2.90. The longer term forecast (30-60 days) is showing a very nice spring for the Midwest and east with above normal temperatures. The bears need to be cautious. U.S. natural gas dry production is down about 4% from this time last year. Hmmm.

Elsewhere

Boy does time fly. It was exactly two years ago today that Malaysia Airlines Flight 370 disappeared. It seems like it was only last month I was reading about it. The Boeing 777 was in route from Kuala Lumpur International Airport, Malaysia to Beijing Capital Airport when voice contact was lost at 01:19 MYT when it was over the South China Sea less than an hour after takeoff. The aircraft disappeared from air traffic controllers’ radar screens at 01:22 MYT. Malaysian military radar continued tracking it as it deviated westward from its planned flight plan until 02:22 MYT when it was over the Andaman Sea.

A multinational search effort, the largest and most expensive in aviation history, for the aircraft commenced but it was never found. Flight 370’s disappearance brought to the public’s attention the limits of aircraft tracking and flight recorders. In response, the Civil Aviation Organization adopted new standards for aircraft position reporting over open ocean, extended recording time for cockpit recorders, and from 2020, will require new aircraft designs to have means to recover the flight recorders before the recorders sink below water.

12 Malaysian crew members and 227 passengers from 15 nations died. Very sad.