Equities and the Economy:

Friday was yet another choppy day with U.S. equities closing marginally lower as investors digested the Labor Department’s employment report. Although it was down as much at 119 points, the Dow clawed back most of that loss finishing down 28 points at 18,240, the S&P 500 ended off 7 at 2,154 and the Nasdaq lost 14 to 5,292. We’re still in the trading range (pennant formation) I mentioned last week. In fact, all three indexes closed in the middle of the range of the past 2 weeks. For the week all 3 indexes closed lower snapping a 3 week winning streak but like the day, the losses were marginal.

As I mentioned Friday, the Labor Department’s employment report showed the U.S. economy added 156,000 jobs in September with the unemployment rate ticking up to 5.0% as the participation rate increased, i.e., more people were out looking for jobs, which in itself is positive because that means people are more optimistic about getting a job after having been considered dropping out of the work force. There were some things noteworthy in the report. First, there are now 2.4 million more jobs in the U.S. that there was a year ago. Importantly, this beats the increase in jobs required for normal population growth. Second, as mentioned earlier, the labor participation rate increased form 62.4% to 62.9% because 444,000 people entered the labor force. That 0.5% may not seem like much but it is significant. Third, average hourly wages rose 0.2% to an annualized rate of 2.6% to $25.79/hour, and fourth, the average work week inched up to 34.4 hours. Bottom line, it was a good report. A good one for “Main Street”. However, it wasn’t too good. It was a Goldilocks report. Not too hot. Not too cold. It should give the Fed enough room to not raise interest rates in November, close to the election, but enough fodder to raise them in December.

This morning the market digested the Employment Report, and maybe the debate last night, and whatever else, and likes it. The European markets are rocking this morning with the major indexes up over 1% pulling U.S. equities higher and the Dow is up a nice and hefty 142 points.

Oil

Profit taking came into the market Friday with WTI closing down 63¢ at $49.81 and Brent settled off 58¢ at $51.93. Let’s just move on to this morning because that’s where all the action is with WTI up a whopping $1.60 at $51.41. Technically, it’ll get real interesting right here. Resistance is about $51.67. I still have my doubts as to the efficacy and strength of the OPEC “decision” made at its recent meeting in Algiers to cut production. That being said, after trading energy for 25 years, I respect momentum. And this market has momentum. There will be a time to short oil but I’m not stepping in front of this train.

Baker Hughes reported Friday the rig count last week increased by 2, + 3 oil, -1 gas. Not much of an increase but we’ve now see the rig count increase the last 13 of 14 weeks.

Courtesy of MDA Information Systems LLC

Natural Gas

Wow! Natural gas prices on Friday skyrocketed with the November contract closing up a huge 14.4¢, 4.7%, closing at $3.193. I’m not exactly sure where this strength is coming from being storage is pretty full and the weather forecast is definitely bearish with above normal temperatures forecasted for the next 2 weeks killing heating load and with it being October there will not be any cooling load. Additionally, last week’s EIA storage report came in bearish. Possibly it was last week’s NGSA winter forecast of a 3.6% increase in demand this winter due forecasting a 12% colder winter this year. But last year was the warmest winter in 30 years. Similar to oil, this morning the natty train is moving down the track at full speed being up another 8.3¢ as I write. Oh, by the way, for the weekend that just ended natural gas at Transco Z6, Non-New York (Philadelphia) indexed at $1.05. Last week it was 80¢.

Elsewhere

Sometimes we need to step back and put things in perspective. We as a society too often focus on the negative (although I try to live my life by the “glass is half full” mantra). Well here’s some facts that’ll show you much things have changed for the positive, especially in the U.S. of A. Back in 1940, only about 75 years ago, 33% of all homes here in the U.S. cooked via wood or coal, 20% did not have electricity, 40% did not have an indoor toilet, 44% did not have a shower or free standing bathtub and 58% did not have central heating. Today, 99% of all homes have these creature comforts.

Looking at it another way, per Professor Robert Gordon, social scientist at Northwestern University, in 1880 there were approximately 215 infant deaths at birth or in the first year of life for each 1,000 births; a sum not changed much from the Tudor Period in England several hundred years earlier. However, by 1900 that had fallen by half to 110 deaths. By 1940 it has fallen to about 40. By 1980 it was down to less than 15 and now it hovers barely above 2. Now that is amazing progress!