Equities and the Economy:

• Stocks end mixed.
• Fed leaves interest rates unchanged.

U.S. equities ended mixed yesterday with the Dow gaining 8 to 20,958 but the other two major indexes fell. The S&P 500 lost 3 to 2,388 and the red-hot Nasdaq fell 23 points to 6,073. Chatter. Let’s move on. The FOMC finished their two day meeting and as widely expected left interest rates unchanged. The Fed said that despite recent modest weakness in some of the economic data (remember how weak Q1 GDP was?) it made it clear they believe the economy is healthy labeling the weakness as “transitory.” The Fed had previously given guidance there’ll be two interest rate hikes between now and the end of the year and being they didn’t raise interest rates at this meeting the odds are higher now of a hike at their June 13-14 meeting. The Fed’s hawkish tone pushed the U.S. dollar to a 6 week high to the chagrin of U.S. producers of commodities for as we all know by now, a stronger U.S. dollar is bearish of commodities priced in U.S. dollars.

The major economic report yesterday was ADP’s private payrolls report. It showed that 177,000 new private sector jobs were created in April which was in line with forecasts. This is the prelude to tomorrows Labor Department report. In other news the Institute of Supply Management reported its nonmanufacturing index for April was 57.5 and above the consensus of 56 indicating growth.

This morning all the major indexes are up some, Dow up 35, being pulled higher by a strong performance in European equities. France’s CAC 40 is up 0.93%. European equities are now at 21 month highs.

Oil

• DOE crude and products report mixed.
• U.S. production increases for 11th consecutive week.

The DOE released its regular weekly crude and products report which was neutral. Crude inventories fell 930,000 and below expectations but gasoline inventories rose, 200,000, less than forecasts while distillates (which is mostly diesel) fell with a forecast of an increase. Traders viewed that data as agnostic focusing more on the fact that U.S. production rose for the 11th consecutive week to 9.293 million bpd. Brent and WTI closed little changed with the U.S. benchmark finishing up 16¢ at $47.82 and the global benchmark settling up 33¢ at $50.79. Oil prices have lost 11% in recent weeks and are at 6 week lows.

It looks like it’s going to be another tough day for the bulls. This morning traders digested yesterday’s DOE report and the bears have pushed prices below the $47 support level. When support is broken it always brings in technical selling and that’s what’s happening this morning with WTI down $1.22. $45.25 is the next support level.

I wonder what OPEC is thinking? They announced the production cut agreement at the end of November and prices immediately jumped but are almost back to pre-agreement levels. At the end of November WTI was trading around $45. We’re only about a $1.25 above that currently and that’s with OPEC and friends taking about 1.65 million bpd off the market (the agreement was for 1.8 million bpd but there’s been about 92% compliance.)

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices consolidating.
• EIA storage report today.

Natural gas closed up 3.3¢ yesterday at $3.228 but prices have consolidated since the beginning of April trading between $3.347 and $3.022. Unlike WTI, U.S. dry production has been flat for many months and is down 2.5 y-o-y. Current prices are over $1.00 higher than last year at this time and it all has to do with the aforementioned decline in production and the fact current storage levels are about 15% below this time last year.

Speaking of storage, today the EIA releases its weekly storage report. The market is looking for an injection of 59 Bcf which compares to 68 Bcf last year at this time. That’s not going to help reduce the deficit. This morning natty is down 1.2¢

Elsewhere

Yesterday I wrote about how electric wind generating capacity has increased in the U.S. Today the subject is solar produced electricity. Pre the EIA, utility-scale solar installations grew at an average rate of 72% per year between 2010 and 2016, faster than any other generating technology. As of December 2016, more than 21.5 gigawatts of generating capacity was in operation across the U.S. with more than 7.6 gigawatts of that capacity coming on line just in 2016. Although solar capacity has been rapidly growing it still makes up only 0.9% of total electric generation. Since 2005, the federal government has provided a 30% investment tax credit, which is scheduled to phase down or expire in 2022.