Equities and the Economy:

• North Korea giving investors jitters.
• S&P snaps 6 day win streak.

After 4 straight days of gains the Dow lost a hefty 234 points, 1.1%, yesterday to finish at 21,753. The S&P 500 snapped a 6 day win streak shedding 87 points, 0.8%, to 2,458 and the Nasdaq dropped 60 points, 0.9%, ending at 6,376. The U.S. markets were playing catch up after being closed on Monday which is when equities fell globally in reaction to North Korea’s thermonuclear test on Sunday. Estimates of the size of the bomb’s yield vary but it’s believed to be between 100 and 160 kilotons. Putting this in perspective, the Hiroshima bomb was 15 kilotons. The U.S. communicated its response at an emergency meeting of the United Nations Security Council with ambassador Nikki Haley saying North Korea’s leader Kim Jong is “begging for war.” The test and the U.S’ response got investors nervous and when investors get nervous they head for safety, which is gold and Treasury bills. Gold prices rose 1.1% trading near 2017 highs and the yield on the 10 year Treasury touched its lowest level since November 10th. Once again, trading volume was below normal which can increase volatility.

The only economic report of significance yesterday was factory orders which came in at expectations falling 3.3%. Investors took the data in stride because factory orders are often skewed by civilian aircraft sales which were down in July but way up in June.

This morning stocks are trying to rebound with the Dow up 85 points.

Oil

• Refineries returning to service.
• WTI pops to 3 week high.

On the news that oil pipelines were commencing operation and some refineries were returning to service crude prices popped and gasoline prices fell. WTI advanced $1.37/bbl, 2.9%, closing at $48.66, its highest settlement since August 11th. Brent rose $1.04, 2%, closing at $53.38, its first close above $53 since May. Meanwhile gasoline prices slid 4.9¢/gallon, 2.8%, finishing at $1.6991/gallon. Motiva Enterprise’s Port Arthur refinery, which is the nation’s largest, is in the initial phases of returning to operation with expectations it will be at 40% of capacity by Monday.

Energy traders have an eye on Irma. She is one mean girl being the strongest hurricane ever in the Atlantic on one of the top 5 ever in history packing winds of 185 mph! For reference, a major hurricane, not just a regular hurricane, is defined as one with winds at least 110 mph. That gives you an idea of how powerful this hurricane is. The current path is not projected to hit the oil and gas producing properties in the Gulf, but I really feel sorry for Florida, especially south Florida. They’re going to feel the full brunt of the storm.

Today traders will be looking at the API crude and products data which as usual will be released after the markets close late this afternoon albeit a day later than normal due to the holiday.

This morning WTI continues to climb being up 40¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Cash prices weaken.
• Prices back near $3.00.

Traders came in after the long holiday weekend to find a weak cash market which pulled prices lower. The October contract fell 9.8¢ settling at $2.972. This is after hitting a 6 week high late last week just below $3.10. The cash market was pressured by a benign weather forecast and the startup of Phase 1 of the Rover pipeline, which added about 200 MMcf/d to the market.

Today’s weather forecast is marginally warmer for the southwest, i.e., Texas, and traders are pushing prices up a little, 1.4¢, back near that magic 3 bucks.

Elsewhere

Here’s a phenomenon I bet you’re not aware. Let me set the stage. As we all know the Amazon rainforest in South America is huge and teaming with vegetation. Naturally the vegetation strips the soil of nutrients. So how does the soil in the Amazon get replenished with nutrients? It’s not by the Amazon River. You’re not going to believe this, but from the Sahara Desert in Africa! While the two are literally continents apart separated by the Atlantic Ocean and have completely opposite climates, they are inextricably linked. It all begins in a massive, ancient lake bed in the Bodele Depression in Chad. The lake, which was larger than all the Great Lakes put together, contains huge deposits of dead microorganisms, and here’s the key, the dead organisms contain phosphorus, a natural fertilizer.

Each day like clockwork, a dust storm 200 miles wide and 100 stories high erupts in the Bodele carrying dust and the dead organisms. The dust storm moves west across Africa and when it comes to the Atlantic it rises and is drawn up high into the sky where the dust and dead microorganisms get caught in the prevailing winds and begin their 3,000 mile journey west and south across the Atlantic to South America and the Amazon. As much as 7,000 tons are airborne at any one time. High in the clouds above the rainforest what was once living plankton dissolves into water droplets and falls to the Amazon in rain delivering thousands of tons of phosphate into the forest and soil below nourishing the rainforest. During the peak of the season for every leaf that exists, three more will grow in a week.