Equities and the Economy

Good morning and happy National Nylon Stocking Day. It was a fantastic day for U.S. stocks yesterday with the Dow pushing up a big 192 points (1.06%) higher, the S&P 500 adding 23 (1.07%) to 2,121 and the Nasdaq jumping 69 (1.39%) ending at 5,051. And along the way the S&P set a new record closing at an all-time high! Sweet! A few fundamental factors contributed to equities gains. First, the Labor Department reported new weekly jobless claims at 264,000 which was less than economists’ forecasts with four week average, which is also closely followed and smooths out the data, coming in at 271,750, down 7,750. Now if you’re like me these numbers don’t mean much but what does is that the four week average is at now a 15 year low! In another report the Labor Department noted that the producer price index fell 0.4% in April and that the Core PPI, which excludes food and energy, fell 0.2% giving investors comfort the Fed will find solace that inflation is below their 2% target Bottom line, modest growth and low inflation is positive for stocks. The third fundamental factor was a weaker U.S. dollar which is on its longest weekly losing streak since October 2013 which is good for multinational companies.

This morning we’re taking a breather after yesterday’s big move with the Dow down 27 points being pulled lower by European stocks which are all trading in the red.. Asian stocks closed mixed with Hong Kong’s Hang Seng and China’s Shanghai moving in opposite directions with the former closing up 1.96% and the latter down 1.59%.

Oil

Oil gave up some of its gains yesterday with WTI falling 62¢ closing at $59.88 and Brent settling down 22¢ at $66.59. Trading was pretty choppy all day with the bulls pointing to a weaker dollar and falling rig count and the bears pointing to record inventories and oil prices now, at least for WTI, getting close, if not at, a point where the economics of drilling work. As always, folks are also keeping an eye on events in the Middle East. Speaking of rig count, today Baker Hughes releases its weekly report on the rig count which has gotten the attention of every investor and more so, trader, in the last 6 months. I’ll let you know about that on Monday.

This morning WTI was getting knackered being down $1.36 but has bounced back and is now down 85¢. The dollar is stronger which is weighing on all commodities but the short term technicals are negative. There’s been an upward sloping channel dating back to March 17th with support at $60.00 which was broken and anytime you have a break of support selling comes in. The amount of selling is a function of how important the support line is. This was moderate support.

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA reported in its weekly storage report that 111 Bcf was injected into U.S. storage fields last year. Now the number was larger than last year and materially greater than the 5 year average but most importantly, less than expectations which were for an injection of 118 Bcf. So the number came out and it was off the bulls began a stampede and at day’s end the June Nymex contract closed up 7.3¢ at $3.008, the first time it’s closed above 3 bucks in nearly 3 months. Increased cooling demand resulting from above normal temperatures accompanied with humidity along with at least 3 nuclear plants down is increasing natural gas demand. The current above normal temperatures abate in the 6-10 day time frame but the warm temperatures return in the 11-15 day period.

This morning is very, very quiet with natty down 1.9¢.

Elsewhere

Mammals and birds have an exclusive claim to the category of warm blooded species, but no more. The Journal of Science reported that researchers have discovered there is a fish that is warm blooded. The fish is called opah, also called moonfish, which circulates heated blood throughout its body enabling the vigorous predator to hunt in frigid ocean depths. Now you biologists out there may challenge this claim stating tuna and certain sharks can warm their bodies. True, but there’s a caveat. They can only warm specific regions of their body before swimming to chilly depths and they must return to the surface to protect vital organs. A unique structure within its gills lets warm blood that leaves the body core help heat up cold blood returning from the gills’ respiratory surface. Being warm blooded gives it distinct advantages over its cold blooded prey and competitors including swimming faster and quicker reaction times.

On a sad note, the great B. B. King passed away last night.  Have a good weekend.