Equities and the Economy:

• Nasdaq logs another record high.
• U.S. manufacturing production highest in more than 3 years.

It was another stellar day for the technology sector with the Nasdaq once again closing at a new record high posting a 20 point gain to 6,170. The Dow and S&P 500 basically closed flat to Monday with both indexes down 2 points with the former closing at 20,980 and the latter at 2,401. Getting straight to the economic news, the Federal Reserve reported that industrial production in the U.S. rose 1% in April. This was the biggest m-o-m increase in more than 3 years bolstering the view the economy picked up steam in Q2. Offsetting this good news somewhat was the Commerce Department report that housing starts fell more than expected 2.6% in April from March. Digging down the data was not as bad as the headline for it was the volatile multi-unit sector that got hit, and hard, falling 9.2%. Single family home starts actually rose 0.4%.

Moving on to this morning the Dow is getting absolutely hammered down 239 points, and it’s not on economic news but political. I go to great lengths to avoid politics in my Morning Energy Blog unless it relates to energy, for example the Keystone Pipeline, but it’s unavailable today because of its impact on the U.S. stock market this morning. However, before getting into it I need to set the stage. The U.S. stock market has been at or new record highs for a while now and we are in one of the longest bull runs in history. Markets don’t go straight up and events come along which bring in the selling resulting in a “correction” or pull back.” Today we have one of those events. That event is the report by the Washington Post that President Donald Trump “asked” now-fired FBI Director James Comey to stop his investigation into former National Security Adviser Michael Flynn. The Post’s report cited a memo from Comey. You may say, “What’s the big deal? President Trump was just asking.” It’s because the president of the United States doesn’t “ask” those who report to him to do something. When a president asks it’s interpreted as being told.

Here’s the point of all this to investors. It diverts President Trump effort from pushing through his infrastructure and tax cuts policies. That’s not good for equities and when you’re at record highs it’s, at a minimum, an excuse sell. This all creates uncertainty, and uncertainty breeds contempt in investing.

Oil

• After a 4 session climb oil closes marginally lower.
• IEA reports extension of cuts may not be enough.

After 4 days of gains oil prices closed very marginally lower with WTI falling 19¢ closing at $48.66 and Brent off 17¢ settling at $51.65. Chatter. Not helping the bulls, the IEA reported yesterday that extending the OPEC and Russian production cuts may not be enough to bring global inventories to the 5 year average. Their report tempered OPEC’s report over the weekend that Russia and OPEC are in agreement the cuts need to be extended until March 31st. The latter news sent prices up 2% on Monday.

Nearly 5 months into the cuts OPEC data is showing stockpiles in the most industrialized nations are almost 300 million barrels above the 5 year average. That being said, U.S. crude inventories have fallen 5 consecutive weeks.

The API released its weekly crude and products report and it was ho-hum. Crude inventories rose 822,000 barrels last week, more than expected, but gasoline inventories fell 1.8 million barrels, also more than expected.

This morning the bulls are back at it. WTI is up 26¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• June natural gas gets whacked.
• Calendar strips little changed.

Yesterday the June Nymex contract got absolutely bludgeoned falling 11.9¢ closing at $2.320. This comes on the heels of Monday’s 7.5¢ loss. Of keen interest to me though is that the calendar 2019 through 2022 strips closed almost unchanged. Also of note is that the market is actually bearish of gas longer term. The 12 month strip (June through May) is trading a very material 46.5¢ greater than the calendar 2019 strip.

Front month prices the last 2 days have been pulled lower on a lack of any bullish news, in fact the weather forecast for the last 10 days of May is bearish, and the fact the spec trade was very, very long. A bull needs to be continually fed and the fundamentals of late have not been fodder.

This morning the bears remain in control with June down 4.2¢.

Elsewhere

Ever heard of Total Planet? Well the company recently created the largest satellite constellation ever to reach orbit. The effort took over 5 years and they accomplished their goal of being able to image the entire land mass of the earth on a daily basis. To do this the company placed 149 satellites in orbit around the earth. In addition to the satellites they have the world’s second largest private network of ground stations. Their customers include researchers, private industry and governments. They placed 50 satellites over North Korea. Just kidding.