Equities and the Economy

I apologize for the delay. Numerous important meetings this morning. U.S. stocks closed sharply higher in a volatile session yesterday with the Dow rising a sweet 198 points, 1.13%, to 17,780, the S&P 500 adding 24 points, 1.18%, to 2,090 and the Nasdaq climbed 66 points, 1.3%, to 5,096. Of note, the Nasdaq 100 index of the biggest non-financial names rose 0.9% to 4,679, just shy of its 15 year high. As mentioned in yesterday’s Report, Apple announced great earnings, primarily on the sale of its iPhones, and the stock climbed 4.1%. I mentioned it was a volatile session. At one point in the day and within an hour’s time frame stocks gave up all their gains trading slightly negative before roaring back. That dip happened right after the FOMC post-meeting communique was released. The communique surprised just about the entire market. Although the Fed didn’t raise interest rates as expected, the shock was that it strongly implied a rate increase was coming in December, which was totally unexpected. Rate increases are typically bad for equities and that’s why stocks sold off hard in a short period of time, but the bears got gored by the bulls with the latter coming in buying hard taking it higher.

This morning stocks retreating just a tad with the Dow down 79 points.

Oil

The oil bulls finally had a great day with WTI rising more than 6% yesterday on the DOE’s weekly crude and products report. That’s its biggest single day rise in 2 months. Historically, for the week the aggregate sum of these oils has risen 2.8 million barrels. Yesterday’s report showed a 700,00 decline. Additionally, the API report released on Tuesday showed large increases in inventories so the market was set-up for big increase. That being said, crude inventories in the U.S. are stunningly high and making their way back toward the high made earlier this year when inventories rose to nearly 500 million barrels. Currently, inventories are just north of 475 million barrels. Future builds are expected. This morning WTI is up 21¢.

Courtesy of MDA Information Services LLC

Natural Gas

The November Nymex natural gas contract expired on a weak note closing down 5.9¢ at $2.033. Same story. Bearish weather which will delay the withdrawals from storage from mid-November to late November. The EIA just released its weekly storage report number showing an injection of 63 Bcf which was less than the market expectation of 68 Bcf and the December Nymex contract is getting a boost from it being up 5.3¢ at $2.351. $2.35 gas in December! Amazing.

Elsewhere

Another example of the effect of low oil prices. On Tuesday Shell Oil announced it would abandon the construction of a major oil-sand project in Western Canada, and take a $2 billion write-down. I don’t care if you are Shell. That hurts! They cited “challenging” economics for unconventional projects amid the sharp drop in oil prices.