Equities and the Economy:

U.S. stocks had a pretty good day yesterday. The Dow was up as much as 129 points but the day traders took some profit at the day’s end and the Dow finished up 77 points, 0.43%, closing at 18,223, the S&P 500 added 10, 0.47%, finishing at 2,151 and the Nasdaq was the big winner on the day rising an even 1.00%, 52, points, to 5,310. U.S. equities have been trading in a narrow range falling 1.1% over the past 3 months with trading volume unseasonably low. That being said, the S&P is just 2% below its all-time high which was on August 25th.

Yesterday’s gains were driven by the merger talks. First, AT&T’s announcement it wanted to acquire Time Warner and, second, TD Ameritrade announcing it was buying Scottrade. So why do investors like mergers and respond by buying the overall market? Because 1) it sends a signal to the market that someone sees value out there at current prices, and 2) it also sends a positive signal about the overall economy. Specifically, that companies are feeling good enough about the economy to spend money and take on the risk of buying another company.

Turning to the economic news of the day, the major report was from Markit Economics who reported its flash index of manufacturing sector activity rose to 53.2 in October from 51.5 in September. This was nicely above Wall Street’s expectations. Earlier in the year the manufacturing sector looked very weak but has recovered with new orders currently rising at the fastest rates in a year. In other words, the “plow horse” of the economy is making material progress.

This morning global markets are taking a breather from yesterday’s gains with the Asian markets closing mixed and the European markets flat to marginally higher which is what we’re doing here in the States with Dow futures down 7. Chatter.

Oil

Oil prices retreated marginally yesterday with WTI closing down 33¢ at $50.52 and Brent off 32¢ at $51.46. If we must “blame” something for yesterday’s decline let’s blame the comments from Jabar Ali al-Luaibi, Iraq’s oil minister, who said the country wanted to be exempt from any freeze production. He said the country needs more money to fight ISIS. ISIS, smi-shish. It, like every other country, just wants the money. Period. All the OPEC countries know how any freeze will work. None of them want to be the sacrificial pig only to see their market share and revenues go to someone else. So why is what Iraq says of significance? Because Iraq is OPEC’s second largest producer. OPEC wants to trim 700,000 bpd from an estimated global over supply of 1.0-1.5 million. Details will be forthcoming at their November 20th meeting. Oh, don’t be surprised if we see an “agreement” on paper. Implementation will be another matter.

This morning WTI is down 12¢. The market seems to be comfortable around the $50 level, at least for now.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas continues to get destroyed! Let me qualify. The front month is getting destroyed. What’s going on in the market is something I rarely see. I need to give you some background. The price curve has been in backwardation for most of the summer, i.e. the front months are higher than the deferred months. The calendar 2017 strip is higher than the 2018 which is higher than the 2019. I’m seeing a massive shift in the price curve with that whole front to back relationship changing. Massive amounts of money are moving up and down the price curve. Let me give you an example. Since last Thursday the front month contract, November, has lost a material 31¢. However, the calendar 2017 strip has fallen only 6.1¢, the calendar 2018 strip has fallen only 2.0¢ and the calendar 2019 strip hasn’t even moved falling a miniscule 0.2 ¢. The price curve is reverting to the norm, a contango market, and it’s got a long way to go. Traders are selling the front of the curve and buying the back of the curve.

Yesterday the November contract fell 16.2¢, 5.4%, closing at $2.831. The November price has fallen a whopping 55¢, 17%, from this month’s earlier 2016 high of $3.366. The combination of continued forecasted above normal temperatures, and those above normal temps actually being realized, and natural gas storage levels expected to be at or very close to record levels at the end of the injection season, which technically is next week.

More evidence of the price curve shift is happening right now. It looks like the big money is out of the November Nymex contract which expires tomorrow for it is down only 4.5¢. It looks like it’s the December contract’s turn to be whipped for it is down a big 15.7¢. And oh, it’s red across the weather forecast map this morning with no signs of even normal temperatures in the 6-15 day time frame except for the very eastern seaboard.

Elsewhere

Snoopy just got downed. It wasn’t the Red Baron who got him. It was the pink slip! After 30 years as the face of MetLife Insurance, appearing on sales and marketing materials and the ubiquitous blimp, MetLife has given the “Peanuts” character the pink slip. The insurance company announced that it was ending its 31 year relationship with the beloved cartoon character next year. The company said it brought in Snoopy at a time when insurance companies were seen as cold and distant. The company said times have changed and they now want to bring “contemporary blue and green colors together in a symbol of partnership to form an M for MetLife” in its new branding. Snoopy’ s exact age isn’t known, though he came onto the scene when Charles Schulz’s first cartoon was reportedly published in October of 1950.