Equities and the Economy

Good morning. U.S. equities added to their gains of October and the first trading session of November with the Dow climbing 89 points, 0.50%, to 17,918, the S&P 500 adding 6, 0.28%, to 2,110, and the Nasdaq adding 18, 0.35%, to 5,145. Investors liked the data that 1) the U.S. auto makers posted record setting car sales in October, and 2) rising oil prices which brought in buyers of energy stocks with Chevron being the biggest gainer in the Dow and rival ExxonMobil the biggest gainer in the S&P. Energy stocks have risen a whopping 22% since August, but are still down 10% on the year remaining the worst performing sector of the year. Yesterday the S&P touched its highest level since late July and the Nasdaq 100 closed at new high for the second consecutive day. Also helping stocks globally was the Caixin/Markit Purchasing Managers Report for Services for China noting that the index rose to 52.0 in October from 50.4 in September indicating economic activity in the service sector is expanding.

On Friday THE big report will be released and that is the Labor Department’s Employment Situation Report for September. The countdown begins today with the release of its surrogate which is ADP’s employment report. ADP is the largest payroll processing company in the U.S. and its report carries a tremendous amount of weight with investors.

This morning the hug fest continues with all the Asian markets closing markedly in the green, European markets trading mostly positive with London’s FTSE and France’s CAC both up over 1% and locally Dow futures up 53.

Three very important Fed personnel will be speaking today at various engagements and investors will be tuning in to get an idea on the direction of interest rates. Fed Chair Janet Yellen testifies before the House Financial Services Committee on bank regulation and supervision at 10 a.m. EST. In the afternoon, New York Fed President William Dudley is scheduled to give a news briefing on looking beyond the macro economy. Fed Vice Chair Stanley Fischer speaks this evening on central bank independence at the National Economists Club.

Oil

Oil prices had a big day yesterday with WTI rising $1.76, 3.6%, closing at $47.90 and Brent climbing $1.75, 3.8%, at $50.54 and above the psychologically important $50 level. A rally in gasoline and diesel prices (up 5%) boosted the feedstock amid an outage of a pipeline, a workers’’ strike in Brazil, the 9th largest global producer, and a force majeure declared by Libya for crude loadings. The strike in Brazil began Sunday and has reduced state-run Petrobras’s daily output by about 25%. This morning WTI is pretty quiet down 13ٗ¢.

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Natural Gas

Although the December Nymex natural gas contract did nothing yesterday falling 0.3¢ and closing at $2.253, it was the only month that closed down. Every other month closed up with the calendar 2016 strip up 1.4¢. Natty continues to carry the very heavy El Nino yoke, more specifically, warm weather in the eastern half of the country. The eastern half of the country is the most important in the U.S. because that is where all the population weighted heating degree days are. Looking at the weather forecast you folks in the upper Midwest are currently having summer weather temperatures hitting the mid-70’s today and tomorrow. Same thing for you folks on the east coast with New York and Philadelphia logging temperatures at those levels. This morning the cash market is a tad stronger natty being up 4.7¢.

Elsewhere

I know this is a tad overdue being that we turned our clocks back last Sunday morning, but I thought you might like a little history on Daylight Saving Time. First of all, note it’s not “Savings,” it’s “Saving” (there’s no “s”). Daylight Saving Time (DST) is the practice of playing with time before the spring and winter months. On the second Sunday of March we “spring forward,” turning out clocks forward by an hour and 8 months later we change the clocks back. The intention of DST was to conserve energy and increase our active daylight hours. Except for Hawaii, most of Arizona and U.S. overseas territories, the U.S. and about 70 other countries worldwide have DST.

Modern DST was first proposed by New Zealand entomologist George Hudson, whose shift-work job game him leisure time to collect insects, and led him to value after-hours daylight. Germany was the first country to observe DST, in 1916 during WWI, in order to conserve coal. The practice spread to other European countries and the U.S. After WW II it was up to individual states in the U.S. to decide whether or not they wanted to use it. The Uniform Act of 1966 established consistent start and end dates and the Energy Policy Act of 2005 added four more weeks of DST and went into effect in 2007.

Whether or not DST actually saves energy is up for debate. For example, The United States Department of Transportation (DOT) concluded in 1975 that DST might reduce the country’s electricity usage by 1% during March and April, but the National Bureau of Standards reviewed the DOT study in 1976 and found no significant savings.

Regardless of the savings, proponents of DST say DST provides the opportunity for an extra hour of outdoor activity during those months being good for our health and providing a boost to tourism, retail and recreation industries.

Have a good day.