Equities and the Economy

As I suspected and mentioned in Wednesday’s Morning Energy Report, U.S. equities were lackluster yesterday with Dow falling 13 points to 16,272, the S&P 500 inching up 4 to 1,924 and the Nasdaq 7 to 4,627. The numbers at the closing bell were all chatter but intraday traders really tried hard to push it lower for at 11:08 CDT the Dow was down 211 points. The reason I suspected it would be a day ending with no major movement is because it was the day prior to the Labor Department releasing its Unemployment Situation Report for September. Let’s just move on to today for the aforementioned report was just released, and it isn’t good. Refreshing your memory, ADP reported Wednesday a reported a bullish 200,000 job growth which is the bar for today’s government report. The government’s report today showed that payrolls outside of farming rose only 142,000 in September. Additional bad news came in the form of revisions to August’s employment figures which was revised sharply lower to 136,000 jobs. All told, revised estimates meant 59,000 fewer jobs were created in July and August than previously thought. The unemployment rate held steady at 5.1% but included the fact that 350,000 workers dropped out of the labor force last month, which lowers the unemployment rate. One of the key data points the Fed looks at, average hourly earnings, fell by a cent to $25.09 during September and up only 2.2% from September 2014, holding around the same levels seen all year and pointing to benign inflationary pressures. Additionally, the number of hours worked in the country fell 0.2% which effectively means job growth is even more anemic than the 142,000. Now here’s the other side of the coin. The job numbers are prone to material revisions and with ADP’s number so much higher than the Labor Department’s I believe we’ll see positive revisions to the September number in the future.

Investors aren’t liking the Labor Department’s report for the Dow is down 207 as I write. It’s a long day folks and as I’ve said many, many times, let’s see where the market closes. Let’s see if the market can shake off this disappointing news.

Oil

Oil continues to meander. WTI fell 35¢ yesterday settling at $44.47. Brent lost a bid more, 68¢, closing at $47.69. There was some fear the Joaquin, the category 4 hurricane off the east coast, would shutter refineries but that is almost certainly not going to happen because overnight forecasters have its projected path more eastward missing the U.S. entirely, albeit the eastern coastal states will see some major rain and high surf. If one want’s to be bearish of WTI here’s a feather for your quiver. Historically at this time of year the U.S. has had 360 million barrels in storage. We currently have a whopping 460 million barrels in storage. Now this is old news so take it with a grain of salt. The new news, which has yet to play out, is how much U.S. production will decline due to the deep decline in the rigs looking for oil. U.S. production has been resilient in the face of the decline, but just in the last couple of months we’re starting to see a drop. The big question is “How much of a decline will there be?” Most traders at this time last year believed we’d be seeing lower production levels than we are right now. Despite the purge in equities, WTI is hanging in there down 50¢

Courtesy of MDA Information Systems LLC

Natural Gas

The EIA released its weekly storage report showing 98 Bcf was injected last week which came in right on expectations. Inventories are currently 454 Bcf, 14.7%, more than last year at this time and the five year average increased by 4 Bcf to 152 Bcf. The EIA data in conjunction with the weather forecast yesterday shirting back to above average from normal brought in the bears and natty closed down a big 9.1¢, 3.6%, a three year low. Prompt month prices have dropped 10% in less than a week and are trading at levels not seen since the summer of 2012, which was after the 2011-2012 winter and the warmest east of the Rockies in 30 years! I’m trying to tell you something here! This morning the weather forecast remains bearish but natty is up 0.4¢. Very likely profit taking ahead of the weekend.

Elsewhere

It looked promising for James A. Garfield in 1880. He has just been elected our 20th president after a distinguished political and military career. Unfortunately, on July 2, 1881 in a Washington railroad station, Charles Giteau, an embittered attorney who had sought a consular post, shot President Garfield. Physicians all over the country were called to help save the president’s life. Through all of July and August, Garfield’s doctors attempted to solve a very perplexing problem. The could not find the bullet in Garfield’s body. Eventually someone suggested sending for Alexander Graham Bell for perhaps his latest invention, the metal detector, would find the bullet. To everyone’s disappointment even the man who invented the telephone could not find the bullet. Bell’s induction-balance electrical device went inexplicably haywire every time it was passed over the President’s body.

On September 19, 1881 the hidden bullet did its work and the president died from the infection it caused. It was only after the funeral that Bell solved the mystery of the failure of his invention. President Garfield had been placed on a bed of metal springs and no one thought to move him to a feather bed! Thus, in an effort to make the president comfortable his attendants sealed his fate.

Have a good weekend.