Equities and the Economy:

• U.S. equities close lower on Friday.
• Dow logs best week of 2017.

U.S. stocks finished lower on Friday with the Dow falling 41 points closing at 20,941, the S&P 500 slipped 5 points to 2,384 and the Nasdaq finished basically flat to Thursday off a point at 6,048. However, it was a fantastic week for equities, and your 401K! Last week the Dow posted a 1.9% gain, its best performance of 2017. The S&P rose 1.5% for the week, its best weekly stretch since the period ended February 17th. The Nasdaq has been on fire! For the week it’s up 2.3% crossing the psychologically important 6,000 level for the first time last Tuesday to mark its strongest gain since January 6th. For the month the Nasdaq was up 2.3% representing its 6th consecutive monthly gain, the longest stretch since a 7 month period ending May 2013. The Dow was up 1.3% for April and the S&P marked a 0.9% gain.

Here’s an interesting statistic for you. Since Election Day and Donald Trump’s win the Dow has rallied 14.2%. For first term presidents that’s the 4th best ever. The top three in descending order are Franklin Delano Roosevelt, Calvin Coolidge and Herbert Hoover. The S&P 500 and Nasdaq are up 11.6% and 16.5%, respectively, for this period. For the first 100 days from Franklin D. Roosevelt’s election on November 8, 1932 the Dow rose an eye popping 46.2%!

Regarding economic news, as I mentioned in Friday’s Morning Energy Blog, Q1 2017 GDP came in at an anemic 0.7%. Analysts attributed the weak number to lower consumer spending, specifically auto sales. Before panicking know that for some reason Q1 GDP always seems to come in low with forthcoming revisions higher.

A data point I particularly noted on Friday was the Labor Department’s Employment Cost Index which rose 0.8% in Q1. The significance? This was the largest quarter-on-quarter increase in 10 years! Wages rose 0.8% and benefit costs rose 0.7%. Further fodder for the Fed to raise rates.

A report on Friday noted Euro zone inflation jumped to 1.9% in April, up from March 1.5% in March, and the highest in 4 years. This will put pressure on the ECB, which has remained in full monetary easing mode, to take the heavy foot off the QE gas.

This morning the Dow is down 20 with the S&P flat and the Nasdaq up 21. Today could be a quiet day for it’s May 1st, International Workers’ Day, aka Labor Day aka May Day, which is a holiday in Central and South America and Europe.

Oil

• Oil prices rise on Friday.
• Prices log 2nd consecutive month of losses.

Oil prices settled a little higher on Friday with WTI rising 36¢ to $49.33 and Brent up 29¢ closing at $51.73. That being said, it’s been a tough couple of months for producers. The May Nymex contract lost 2.5% in April and the June contract has fallen 3.4%. Traders continue to be concerned about the global supply/demand balance even with the OPEC production cuts and the likelihood OPEC will extend them at their meeting in Vienna on the 25th of this month. U.S. oil production remains strong with the DOE noting that lower 48 crude production hit a new 20 month high at 9.30 million bpd. Also, the rig count keeps increasing. On Friday Baker Hughes reported the oil rig count went up 9 and the gas rig count increased 4. Texas remains the place to be, only this time it was the Eagle ford where the action was with 5 additional rigs added. The Permian added 2 rigs.

This morning it’s quiet. WTI is up 20¢. Chatter.

Courtesy of MDA Information Systems LLC

Natural Gas

• Cash market supportive.
• Production continues to lag.

Natural gas prices closed up a little on Friday with the June contract adding 3.7¢ to $3.276. The cash market was supportive being up a nickel from Thursday. Despite the rising rig count production continues to be flat and down 2.5% from last year at this time. The weather forecast is benign but LNG feedstock demand and Mexican exports continue to support demand. This morning it’s chatter with natty down 2.5¢.

Elsewhere

Be glad you didn’t go to the Fyre Festival! The music festival’s promoters espoused it as a super luxury music festival. The location the Islands of the Exumas in the Bahamas. Supermodels Bella Hadid and Kendall Jenner promoted it. The promoters promised the “best in music, cuisine, design, and hospitality on a private island.” It was slated for the weekends of April 28th to 30th and May 5th to 7th. The cheapest ticket for one weekend on the island was $1,500 and VIP packages cost as much as $250,000 per person. Perks included an open bar, food from top chefs, and “access to actresses, models, comedians and influencers.”

Looks like it didn’t quite go off as planned. According to the Wall Street Journal, as the festival approached there were signs of trouble in Paradise. Fans complained they were not given logistical details and the organizers reportedly missed deadlines to pay artists. The headlining band Blink 82 had pulled out and attendees complained of substandard food and dangerous living conditions and looting. What was advertised as a menu curated by a celebrity chef turned out to be slices of bread with cheese distributed in Styrofoam containers. The tents provided to concertgoers appeared to be the same kind of emergency and disaster relief shelters used by the United Nations for natural disasters and war zones, a far cry from the luxury cabanas advertised.

Ticket holders not already on the island had their flights canceled and money refunded. If you were unfortunate to be already on the island the organizers herded everyone into the airport and folks were trapped without food and water. Needless to say, the Bahamas Ministry of Tourism was “extremely disappointed.” That’s an understatement!