Good morning. Friday ended a solid week of gains for U.S. equities with the Dow closing up a hefty 128 points at 16,805, the S&P 500 adding 14 to 1,965 and the Nasdaq closing at 4,484, up a big 31. For the week the Dow rose 2.6%, the S&P 4.1% and the Nasdaq 5.3%. It was the S&P’s largest weekly percentage gain since January 2013. It snapped a 4 week losing streak bouncing back from a 6 month intra-day low the previous week. Folks what we’ve seen the last two weeks is Webster’s definition of “volatility.” Helping our 401K’s on Friday was the Commerce Department’s report of sales of new homes in September which rose slightly to an annual rate of 467,000 hitting a 6 year high and topping expectations.

Overnight Asian stocks closed mixed but all the major European bourses are bleeding profusely which is pulling U.S. stock lower with the Dow down 40. Growth worries persist on the Continent which continues to weigh on equities there. The major event this week will be the FOMC two day meeting which begins tomorrow. There is no press conference scheduled so investors will only have the post-meeting communique to parse. Speaking of the Fed, today marks a big day in their QE program for today is the last day the Fed makes asset purchases.

Oil continues its march lower with WTI falling $1.08 on Friday to $81.01 and Brent losing $0.70 to $86.13. That being said, Brent was down only 3¢ on the week. WTI fared worse down 1.3% last week posting a 4th weekly loss. Analysis is starting to surface that breakeven costs for shale oil production may be significantly below the $80 level and with Saudi Arabia not cutting production prices are likely to head lower. Technically, the chart looks horrible for the bulls. Over the last couple of weeks WTI has held support at around $80 but the highs have gotten lower over that same time frame which translates to when, not if, $80 will be “taken out.” The bears are working really hard this morning to make that happen with WTI down $1.16. $75 here we come!

Natural gas did absolutely nothing on Friday closing up $0.001 at $3.623/MMBtu. Natty prices are now 27% lower than their summer highs and the lowest in a year. The weather forecast continues to put pressure on natty with extremely mild forecasts predicted in the Midwest. The east coast will be having more “normal” temperatures in the 6-15 day time frame which will definitely kick on heaters at night. The bears need to be careful here though. With prices at an annual low and winter fast approaching and yet another forecasting service, WeatherWorks, predicting a colder than normal weather for the eastern half of the country prices could bounce back quickly. This morning natty is down 6.8¢.

Want to see what lower oil prices due to an oil company’s profits? Occidental Petroleum reported earnings last week down 21% from the same period a year ago. Want to see what lower oil prices due to an airline company’s profit? United Continental’s quarterly profit rose, are you buckled in (pun definitely intended!) a whopping 82% compared to last year for the same period. That’s not a typo. Fuel costs are 20% to 30% of an airline’s cost. Want to see what a strong energy industry can do to a company’s earnings? Caterpillar reported blowout earnings for Q3 2014 beating estimates by an incredible 36¢/share. How did a company the huge size of Caterpillar beat earnings by that much? Almost 25¢ worth came in the energy and transportation segment. That’s the segment that sell equipment to the oil and gas business. Have a good day.

Courtesy MDA Information Systems LLC

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