Equities and the Economy:

• S&P and Nasdaq close at record highs.
• Global equities trading at record levels.

U.S. stocks continue their grind higher marking 6 consecutive sessions of higher closes with the S&P 500 and Nasdaq ending at fresh record highs. The S&P 500 rose 11 points finishing at 2,415 and the Nasdaq added 42 ending at 6,205. The S&P’s win streak marks the 11th time the large-cap index has risen for 6 sessions in a row in the past 5 years. I hope history repeats itself. In the 10 previous incidences, stocks were higher 2 weeks later 80% of the time with an average gain of 57 points.

While not setting a record, the Dow climbed 71 points to 21,083 putting it within 33 points of its record of 21,116 on March 1st.

Not doubt a couple of powerful forces are at work. I discussed this yesterday. The global economy is definitely improving and central banks have yet to materially reduce QE. Oh, they may not be adding to it, but they definitely have not taken their foot off the gas pedal. Evidence of this was in yesterday’s FOMC minutes from their May meeting which said the committee would take a slow and deliberate approach to unwinding its massive balance sheet built up as part of the Fed’s QE program. This is Chairperson Janet Yellen’s Fed. She is a monetary dove. She is not going to take a chance on raising interest rates too soon and being responsible for derailing the growing economy. In her defense, too much QE reveals itself in inflation and we really haven’t seen much of that. The Fed’s target is 2% and although we’re there now, there’s no signal it’s accelerating.

The only fundamental economic report of significance released yesterday was initial jobless claims by the Labor Department and there were no surprises there.

This morning in pre-holiday trading the markets are very quiet. The Dow is down 16. Chatter

Oil

• OPEC extends production cut agreement 9 months.
• Prices get hammered.

I told you so. Go look at my Blog earlier in the week. Buy the rumor. Sell the fact. That’s exactly what happened. Prices had been rising for about 2 weeks on news reports building up to yesterday’s OPEC meeting. OPEC was very transparent that production cuts would be extended for 6 months, maybe 9, and we got the latter. There were rumblings that cuts might be greater than current levels but everyone knew that was unlikely. Basically, yesterday’s announcement of the agreement was what everyone expected. Honestly bulls, prices got to high based upon fundamentals and yesterday was the day of reckoning. WTI fell $2.48 to $48.9 and Brent lost $3.50 to $51.46. Nothing’s really changed fundamentally over the past 2 weeks and guess what. We’re back to where prices were on May 16th.

Regarding the cuts, I’m super impressed the current cuts adherence level is so high. The 6 Middle East countries that comprise the Gulf Cooperation Council are really feeling the squeeze with lower oil prices and less production. They’ve been forced to enter the international capital markets with vigor over the past 12 months. It’s very much a balancing act. Too big a cut they lose more revenues and just entice other producers (i.e., the U.S.) to fill in the void.

This morning there’s no new news and WTI is trading accordingly, up 19¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• EIA storage report mildly bearish.
• June Nymex contract expires today.

Yesterday the EIA released its always closely watched storage report noting 75 Bcf was injected into storage last week. This was 5 Bcf more than what traders’ expected and prices fell closing down 2.7¢ at $3.184. That being said, the market has found a happy balance at the $3.20 level were we’ve been broadly trading now for about 2 months. The big question now is how are summer temperatures going to manifest. I can tell you traders will be playing it from the long side for the next few months because longer term forecasts are predicting a hot summer across the country.

I’ve been following the production data closely and I’m seeing U.S. production creep higher. For most of 2017 U.S. dry production has been running about 70.5 Bcf/d, down 2.5% from the same time last year. For the last 10 days or so it’s been coming in over 71 Bcf/d. My forecast: by the end of the year we’ll be back to around the 72.3 Bcf/d level which is where we were last year. Reasoning? $50 oil is bringing in a lot of associated gas with it, especially in the Permian which is showing material y-o-y production growth, and additional midstream and pipeline expansions in the Marcellus and Utica.

Looks like traders have taken the day off in natty too. The June Nymex contract, whose last day of existence is today, is virtually flat to yesterday’s close.

Elsewhere

• As we all know, and are anticipating, the Memorial Day holiday weekend is upon us. Here are some facts about Memorial Day.

• Memorial Day was first celebrated May 30, 1868. General James Garfield made a speech at Arlington National Cemetery after which approximately 5,000 participants helped decorate the graves of more than 20,000 Union and Confederate soldiers buried there.

• Memorial Day is purposefully celebrated on May 30th. Three years after the Civil War ended, May 5, 1868, Maj. Gen. John A. Logan declared Decoration Day would be observed on May 30th with the flowers put on the graves of the war dead. May 30th was chosen because flowers would be in bloom all over the country.

• The 3rd U.S. Infantry is always associated with Memorial Day. Why? Since the late 1950’s on the Thursday before Memorial Day about 1,200 soldiers of the 3rd place small American flags at each of the more than 260,000 gravestones at Arlington National Cemetery. They then patrol 24 hours a day during the weekend to ensure each flag remains standing.

• Have you heard of the National Moment of Remembrance Resolution? This resolution was passed in the year 2000. At 3 PM on Memorial Day all Americans are asked to voluntarily and informally observe in their own way a moment of remembrance and respect by pausing whatever they are doing for a moment of silence.

Here is some trivia.

• Memorial Day was declared a federal holiday in 1971 (not that long ago considering).

• On Memorial Day the flag should be at half-staff until noon, then raised to the top.

• Red poppies are recognized as the Memorial Day flower.

• New York was the first state to officially recognize Memorial Day.

This weekend as you enjoy your time, hopefully with loved ones, please consider what Thomas Campbell said, “The patriot’s blood is the seed of Freedom’s tree.”