Equities and the Economy

Good morning and many, many thanks to all you veterans who risked your lives for the rest of us so we can live in freedom in the greatest country on earth. U.S. equities waffled around unchanged all day yesterday not doing much and closed as such. The Dow rose 28 to 17,758, the S&P 500 climbed 3 to 2,082 while the Nasdaq slipped 12 to 5,083. All chatter. The S&P actually snapped a 4 day losing streak. Apple weighed on the Dow and Nasdaq falling 3.2% which alone shaved about 25 points off the Dow. Apple also represents about 20% of the Nasdaq, which is a market-cap weighted index. That’s as I say is “material.” Apple fell after Credit Suisse said the company’s supply-chain orders have weakened recently in Asia, possibly because Apple recently stated they are stopping the production of the iPhone 5c

Perhaps the most important news yesterday came from China where factory orders in October were up 5.6% y-o-y, which was a bit below consensus, while at the same time retail sales were up 11.0% y-o-y which came in better than the estimate of 10.2%. Pretty funny that up 5.6% is “disappointing” when just about any other country in the world would celebrate that statistic.

Trading should be light today with the U.S. celebrating Veteran’s Day and the Europeans Armistice Day. The U.S. equity markets are open and the Dow is down 13 points but the bond market, which is multiples larger than the equity markets, is closed. Banks are also closed.

Oil

Oil prices managed to find a small bid yesterday with WTI rising 34¢ to $44.21 and Brent up a quarter to $47.44. The IEA (not our EIA) reported yesterday that upstream (that’s exploration) investment will decline 20% this year with the trend continuing next year. Putting this in perspective, it’s been 25 years since there’s been 2 consecutive years when upstream investment has declined. It added that oil prices were unlikely to hit $80/bbl before the end of the decade.

As I’ve mentioned many times, OPEC’s, really Saudi Arabia’s, strategy of maintaining market share vs. price is directly targeted at the U.S. shale producers. The U.S. shale producers latest challenge would be about 2 miles long lined end to end and weigh almost 3 million metric tons, and it’s due to reach American ports this month. Iraq, the fastest growing producer of the 12 nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq, according to the EIA. This is obviously to the chagrin of U.S. producers, but to the delight of tanker owners who are headed for their best quarter in 7 years.

This morning WTI is down 71¢ awaiting the DOE’s crude and products report due out at 9:30 CST.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural Gas prices tried to rally yesterday morning being up as much as 6¢ but settled back down by day’s end closing up an even 2¢ at $2.320. Weather forecasts keep coming in consistently warm for the eastern half of the country making the bulls yoke very, very heavy. That being said you bears better be careful. The shorts already have their positions on. How do I know this? Because the latest commitment of traders report, which comes out every Friday reflecting data for the week before, showed a record number of short positions in the market. Don’t be surprised if we get a short covering rally which could be a dime or so, but it will be purely technical in nature.

Elsewhere

I am running way behind this morning so I’m going to keep Elsewhere short. Follow Oscar Wilde’s recommendation, “Be yourself. Everyone else is taken.”
Have a good day.