Good morning and happy National Chicken Wing Day.  After a day of global equity destruction that dragged the Dow to its lowest level in 6 months equities in Europe and the U.S. bounced back yesterday with the bellwether S&P 500 leading the way rising 1..23%, a nice 25 points, ending at 2,093.  The Dow and Nasdaq did pretty well also with the former adding 189 points, 1.09%, to 17,630 and the latter closing up 49, 0.98%, at 5,089.  Both the Dow and S&P recovered all of Monday’s losses.  Investors went bargain hunting yesterday after Monday’s capitulation.  In economic indicators, U.S. consumer confidence fell more than expected.  The Conference Board, a private research group, said yesterday its consumer confidence index fell from 99.8 in June to 90.9 in July.  This was a negative surprise with the index now at its lowest level since last September.  It appears that although the events occurred on different continents consumers were worried about the Greek debt and the sharp drop in Chinese equities.  Speaking of China, I doubt if any of you have positions in China (I’ve dabbled there but am out) and stay out of that market!  The Chinese government is taking extraordinary steps to support the Chinese stock market, with additionally action likely, hence, the Chinese stock market is a poor barometer of the country’s economy.  This is a mug’s game and there will be a day of reckoning.

The “risk on” game was at hand yesterday as investors moved into riskier assets, such as equities.  Treasury bill yields climbed with the 10 year moving up from 2.228% on Monday to 2.252% yesterday.  This may seem like a small move but when you have billions and billions of dollars at work the amount on the right side of the equals sign is very material.  Remember, the amount of capital involved in T-bills and bonds dwarfs the amount of capital in equities.  T-bills is where sovereign money, i.e. foreign governments’ capital, plays.

As your regular readers know, I like to comment about the housing market because for so many folks it’s the single biggest line item on their balance sheet.  The Commerce Department yesterday reported that U.S. home ownership in Q2 fell to 63.5% which is a record low.  The rate peaked in 2004 at 69.4%.  The residential rental vacancy rate fell to 6.8%. the lowest level since 1985, down from 7.1% in Q1.  Home ownership may be declining but home prices aren’t.  S&P/Case-Shiller reported that it’s Home Price Index rose 4.9% year-on-year.  Home prices rose most in Denver while Washington D.C. showed the weakest price increase at 1.3%.  Housing prices are rising at about twice the rate of inflation and with wages essentially static it’s going to be difficult for prices to keep rising at this pace, at least outside of the major cities.

The big news today will come from the FOMC which will be ending its two day meeting.  There will not be a press conference so investors will only have the post meeting communique to digest.  The English majors will be at work parsing every word looking for the slightest nuance change in language regarding the economy.  I don’t expect much of a change in their message.

This morning China’s Shanghai closed 3.44% higher but this is after losing about 10% the last 2 sessions.  European stocks are quiet trading on either side of unchanged while here in the U.S. equities are basically unchanged from yesterday’s close with Dow futures up 38 points.  Can’t read much there.

Oil

Commodities have, finally, stabilized with the bears standing down from their positions of dominance and the bulls licking their wounds.  Oil prices ended mixed yesterday with WTI gaining 59¢ closing at $47.98 bouncing off 6 month lows.  Yesterday’s marginal gain came after a 4 day sell-off which resulted in a 6-7% decline in oil prices.  Yesterday Brent fell 17¢ to $53.30.  Earlier in the day it traded $52.28, its lowest level since early February.

Yesterday after the bell the API reported that U.S. crude inventories fell 1.9 million barrels with stocks around Cushing, OK, the WTI Nymex delivery point, falling 0.4 million barrels.  As I’ve mentioned many times traders put more credence in today’s DOE crude and inventory report than the API’s because reporting is mandatory.  Reporting for the API is voluntary.  Additionally, more companies report to the DOE than to the API.

Regarding Iran and the nuclear agreement and ending sanctions, Treasury Secretary Jack Lew said yesterday when speaking to the House Committee on Foreign Affairs that “Iran will not receive any new relief until it fulfills all of the key nuclear related commitments specified in the deal, thereby pushing back its breakout time to at least one year.”  In other words, it will be a rather long time before Iranian crude shall hit the world’s markets.  The bulls will be grateful for that for its estimated the current global market is 2 million bpd oversupplied.

This morning WTI is retreating a bit being down 35¢.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices finished 3.1¢ higher yesterday closing at $2.821.  This week temperatures have been above normal in the key population weighted population centers of the country which is keeping the cash market strong.  That’s going to change however for as you can see in the forecast the temperatures in the upper Midwest and east will be moderating to normal to below normal over the 6-15 day period.  There a very fine balance going on right now with increased demand due in the electric generation sector and slightly lower U.S. natural gas dry production and folks looking into the near future of waning electric generation demand with autumn only about a month away.

Today is a very important day for traders and those of you with Nymex related floating electricity and natural gas contracts for today the August Nymex contract expires setting the price of your electricity and natural gas for next month.  Natty is up 3.2¢ as I write.

Elsewhere

I’ll leave you with a feel good note.  According to the Census Bureau, only 1 in 10 American homes had air conditioning in 1960.  That rose to nearly 50% in 1973 and is presently nearly 90% presently.  Further, that 10% or so that do not have air-conditioning live mostly in colder climates of the U.S.  This is but one example of how our standard of living has improved over the years, and how our lives have dramatically changed for the better.

Have a good day.