Equities and the Economy:

Friday marked the 9th consecutive session the S&P 500 has closed lower. This is the longest losing streak since December 1980. However, the total loss has only been 3.1% over the period and the S&P is only off 5% from record highs in August. Hardly anything to get excited about. The numbers on Friday were: Dow down 42 points to 17,888, the S&P off 3 points to 2,085 and the Nasdaq closed at 5,046, down 12 points. For the week the Dow was down 1.5%, the S&P off 1.9% and the was Nasdaq 2.8% lower.

The big economic report on Friday was the Labor Department’s employment situation report, which was very good. The U.S. added 161,00 jobs in October and the unemployment rate fell 0.1% to 4.9%, an 8 year low. Although the jobs number was below expectations but 1) seen adequate enough to keep the economy moving forward, and 2), and this is important, August’s and September’s employment gains were increased by 44,000. As I’ve mentioned previously, data revisions are important to me for in good times revisions are for the positive and in bad times revisions are negative. However, possibly the most important data point in the report was 2.8%. This was the y-o-y increase in the average hourly wage. Over the prior month wages rose 0.4% in October. So why is this number so important? Inflation my friends, inflation. As worker’s pay increases so too do the prospects for a faster rise in consumer prices. This piece of data very likely fits the bill for the Fed to increase interest rates at their December meeting. The market is pricing in a 70% probability of an interest rate increase in December.

This morning big things are happening. I try very hard to keep this Blog apolitical unless politics impact the energy markets such as the Keystone Pipeline event. However, this morning I cannot avoid the matter because the impact is so material. I didn’t mention this a week or so ago but one of the drivers that pushed equities lower over the last nine days was FBI Director James Comey’s letter to Congress less than two weeks ago that he was re-opening the investigation on Hillary Clinton’s emails. This occurred because the FBI said they found Ms. Clinton’s emails on Anthony Weiner’s laptop that “appear to be pertinent” to the Clinton investigation. Weiner’s wife at the time was an aide to Clinton. Well yesterday Comey sent another letter to Congress saying the FBI determined that almost every email on the laptop was a duplicate of previous emails and as result the FBI has not changed the bureau’s earlier decision that no crime occurred. So why do I need to mention this? Because on this news the Dow is up a whopping 263 points this morning. Comey’s initial letter resulted in Ms. Clinton’s lead in the polls over Donald Trump to shrink, which coincided with equity prices falling and coincidently, the Mexican peso falling relative to the U.S. dollar. Although I don’t know how Comey’s letter yesterday has affected the polls, U.S equities are definitively stronger this morning and the Mexican peso is hugely stronger vs. the U.S. dollar. The relationship of the Mexican peso to the U.S. dollar has been the financial market’s yardstick on who will win the election.

Oil

Crude oil prices were all over the place on Friday on rumors concerning OPEC. WTI was at one point down $1.16, more than 2%, after an OPEC source told Reuters that, “the Saudis have threatened to raise their production to 11 million bpd and even 12 million bpd, bringing oil prices down, and to withdraw from the meeting.” However, a Bloomberg report surfaced soon after that suggestion the Saudis never made such a threat. The net effect was when the final bell rang WTI was at $44.07, down 59¢, and Brent finished the day off 77¢ at $45.58. For the week oil prices were down 10% and Friday’s close is down 15% from their October highs and at pre-Algiers meeting levels, which was when OPEC announced they would be discussing a production cut.

WTI is a little stronger this morning. Maybe on much, much stronger equities or maybe it’s because of the jawboning by the Algerians. Their energy minister said yesterday there “will be no return on the Algiers agreement. Now we are in application of the agreement. The high-level technical committee is working on it. The Algiers agreement has not been called into question.” Regardless of which event, or both, the 36¢ WTI is up is telling me traders aren’t believing OPEC will cut.

Baker Hughes released their rig count report on Friday noting an increase of 12 rigs last week, 9 oil and 3 natural gas.

A 5.0 magnitude earthquake rattled the town of Cushing, OK last night causing “significant damage.” Cushing is the home to the country’s largest commercial oil storage hub and the delivery point of the Nymex futures contract. A 4.5 magnitude earthquake shook northern Oklahoma last week and a 5.8 magnitude quake, the largest in the state’s history, hit the town of Pawnee in September.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices stabilized on Friday with the December contract closing basically unchanged to Thursday’s close, down 0.2¢, at $2.767. The story has, and is, the weather and forecast. The weather forecast all through October and through last week showed above normal temperatures through November and the longer term forecast showed above normal temperatures through December. That changed last week when the private forecasting we subscribe to, as well as many other trading organizations, showed below normal temperatures for the Great Lakes region for January. That same forecaster this morning has cooled off their 6-15 day forecast. While they still predict above normal temps for the Midwest and east, they’ve lowered the magnitude of the deviation from the norm. This has brought in some short covering and natty is up 3.1¢ as I write.

Elsewhere

Tomorrow is the election. We all know well who’s running for president. We also know how unpopular both of these candidates are. But how unpopular really are they? Well research firm Strategic Vision decided to find out. The company did a survey of car buyers asking them to rate the candidates the same way they rate vehicles, on a scale of 1 (hate) to 7 (love). A middle score of 4 represents “satisfied.” The firm then indexes the ratings to produce a score ranging from -1,000, which would be total hate, to +1,000, or total love. Here are the results. Donald Trump earned a -569 and Hillary Clinton a -481. That places both candidates in the second-lowest category, characterized as “failure.” Per President Alexander Edwards, “We’ve never seen scores this bad, ever.” For reference, the research firm did a similar polling in 2012. President Obama got a score of +331 and his opponent, Mitt Romney, got a score of +307. When the firm asks consumers to rate vehicles they’ve purchased, there rarely is a score below +200. One of the worst scores for any vehicle was the Chevy Express Cargo Van, which earned a score of +207. Bottom line, one of the firms worst rated vehicles pleased consumers far more than either of the main choices for president this year. Sad. Really sad.