Equities and the Economy

U.S. stocks bounced back nicely yesterday from initial knee jerk selling on the news of Turkey shooting down a Russian military jet. In the morning Dow futures were down over a hundred points but rallied back nicely with all the major bourses closing in the green, marginally, but in the green. The Dow closed up 19 points at 17,812, the bellwether S&P 500 added 2 to 2,089 and the Nasdaq added a unit ending at 5,103. Folks, time and time again this market has been hit and rallied back. We call this in trading a “buy dip mode.” Helping the indexes was that energy was strong with oil prices up 2% yesterday.

The Commerce Department yesterday posted its first revision to Q3 GDP upping the growth rate to 2.1% which was in line with economists’ expectations. The Conference Board its index of consumer confidence fell to 90.4 in November for 99.1 in October. The Street was expecting something closer to October’s number so this was quite disappointing. Disconcertingly, November’s number was the lowest since September 2014. The housing market continues its strength. S&P/Case Shiller released its 20 city home price index for September noting home prices rose 5.5% y-o-y which was much better than expectations of a 5.2% rise. Limited inventories are the reason, and I don’t expect much of an increase in the same for months to come. Builders just cannot get enough lots and cannot get the manpower to build their homes.

This morning the Dow is up 23 points with investors riding the coattails of the European markets which are strong today being up between 1.0% and 1.92% and recovering from yesterday’s losses which were related to the downing of the Russian jet. I’d be very surprised if we saw much movement in the indexes today.

Oil

As mentioned previously, oil prices rallied yesterday having their biggest one day gain in 3 weeks. WTI rose $1.12, 2.7%, to close at $42.87 and Brent climbed $1.29, 2.9%, settling at $46.12. The price jump is all in the fear premium which is related to the shooting down of the Russian jet. You know, if it wasn’t for oil no one would care much about what’s going on in the Middle East, but oil is the dominant economic engine for so many of the participants of the region and it’s strategically the first and biggest risk factor. OPEC and Russia are still pumping crude at record levels, Iran is preparing to add supply to the market and the U.S. dollar is stronger, all not making for much of a bullish argument.

The API released its weekly inventory data noting U.S. stockpiles increased by 2.6 million barrels last week and way above forecasts of an increase of 900,000 barrels. Additionally, gasoline and distillate supplies were forecast to decline by 200,000 and 700,000 barrels, respectively and they actually increased by 1.4 million and 700,000 barrels so all three categories were bearish. That’ll feed a bear, and it’s doing so this morning with WTI down 84¢. Today the DOE releases its weekly crude and products report so let’s see how it comes in relative to the API.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices didn’t do much yesterday closing down a penny at $2.200. Today should be a fun day! The EIA releases its weekly storage report today with the market looking for an injection of 10 Bcf which reflects last week’s activity. In all likelihood this will be the last injection until next April. Today’s storage injection number will add to the 4.0 Tcf we already have in the ground which itself is a record. Today we’ll also see the expiration of the December Nymex contract setting the December cost of electricity for those on an unhedged heat rate as well as the cost of December natural gas for those on an unhedged Nymex + basis product.

The December contract is staring out lower down 3.6¢. Just look at the weather forecast. ‘Nough said.

Elsewhere

The name Justin Bieber may evoke an emotional response from you, but there is no denying his amazing success. It was announced yesterday that for this week he has (are you ready?) 17 songs on the Hot 100 list which ranks the 100 most popular songs in the U.S. So how big a deal is this? It’s a very, very big deal! The previous record lasted for decades and was 14 songs set by none other than that 4 man group out of Liverpool called the Beatles! All but one of the songs is from his new album Purpose which became his 6th to top the Billboard 200, which put him in rare company in musical history. Interestingly, none of the 17 songs have actually been ranked number 1 with the song Sorry currently sitting at number 2.

Happy Thanksgiving to all. On Thanksgiving only turkeys don’t give thanks!