Equities and the Economy:

• Equities end little changed.
• U.S. dollar hitting 2.5 year lows.

U.S. stocks ended little changed yesterday with the Dow closing down 23 points at 21,785, the S&P 500 finishing flat to Wednesday at 2,465 and the Nasdaq posting a slight gain of 5 points to 6,397. Investors are keying in on a couple of factors right now. First, Irma. After the devastation caused by Harvey we now have Irma and the question is how much damage it’s going to cause and whether, and by how much, the two storms will impact GFP growth and corporate earnings. As an example, this week insurance company stock prices have taken material hits. The second factor is North Korea. Rumors are swirling that the country may fire yet another missile this weekend. Earlier this week the S&P has its worst day in about 3 weeks due to North Korea conducting a thermonuclear test last weekend. Neither of those items are going to breed investor confidence.

Regarding the fundamentals, yesterday the Labor Department reported in its weekly jobless claims report that first time claims rose 62,000 last week which was a huge jump from previous weeks and the highest since Spring 2015. However, the market took it in stride knowing it was due to Hurricane Harvey. Other data was positive with the Labor Department also reporting it revised its worker productivity in Q2 up from 0.9% to 1.5%. This was indeed good news.

This morning stocks are on the defensive with the Dow down 50 points pulled lower by a very weak U.S. dollar which is trading at a 2.5 year low vs. a basket of other currencies. A couple of things are at work here. First, because of Harvey and Irma investors believe that the Fed will push back any monetary tightening effort until at least early 2018. Monetary tightening strengthens a currency and “accommodating” policy weakens a currency. The second item is that there’s talk that President Trump and the Democrats are looking to scrap the debt ceiling for good. That means more dollars will be printed which weakens a currency. A weaker currency also makes U.S. exports cheaper and imports more expensive so we’ll have to see how this plays out.

By the way, Equifax announced it was hacked this past summer potentially exposing personal details of 143 million U.S. consumers. Putting this in perspective, the population of the U.S. is 323 million.

Oil

• Oil prices flat.
• Gasoline falls for 4th session.

With Irma barreling toward Florida and looking to miss the oil and gas producing areas in the Gulf of Mexico oil prices ended flat to Wednesday. WTI fell a meaningless 7¢ closing at $49.09 after closing on Wednesday at its highest price since August 9th. Brent gained 29¢ to settle at $54.49. Gasoline prices fell for the 4th straight session with the October Nymex contract dropping 1.2¢ to $1.661/gallon.

The DOE released its weekly crude and products report which came in pretty much at expectations. Crude stocks climbed by 4.6 million barrels. The increase followed 9 weeks of declines and was due to so much refining capacity being off line. Gasoline stocks fell 3.2 million barrels which was somewhat less than forecasts of a 5.0 million barrel drop.

OPEC reported crude output fell in August for the first time in 5 months. The group produced 32.65 million bpd, down 170,000 bpd from July.

This morning it’s quiet. WTI is down 10¢

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices meander.
• EIA storage report comes in at expectations.

The October contract fell 1.9¢ yesterday closing at $2.981. The EIA released its weekly storage report stating 65 Bcf was injected last week. This came in right at traders’ expectations. Yesterday’s weekly injection was the first in 8 weeks that was greater than the 5 year average. This morning the weather forecast is marginally warmer for the 11-15 day time frame, but this timeframe is for the middle of September which should yield beautiful weather for the Midwest. Natty is down 4.9¢ in light trading.

Elsewhere

I, unfortunately, am having to write again about hurricanes. This time it’s Irma. And she’s a very, very nasty gal. Here’s 5 things you should know about her.

1) How strong is Irma? Winds were as high as 185 mph. A category 5 hurricane, the highest level, is a hurricane with sustained winds over 156 mph. A cat 5 hurricane portends catastrophic damage. Irma is the strongest hurricane ever in the Atlantic. As of this morning Irma is a category 4 hurricane with sustained winds of 155 mph.

2) How rare is a category 5 hurricane? There have been 35 cat 5 storms in the Atlantic since 1924 with only 3 hitting the U.S. while still being a cat 5. That being said, there’s a reason we all remember names like Katerina, Andrew, Hugo and Camille. All were devastating cat 5 hurricanes. Hurricane Andrew was the last cat 5 hurricane to hit Florida, which was in 1992. 61 people were killed and 135,000 homes destroyed. Since that time the state’s population has grown by about 51% to over 20 million residents.

3) Will the storm die out after hitting Florida? Florida has proven to be a poor hurricane buffer for other U.S. states. Florida’s thin peninsula allows hurricanes to recharge over water quickly. Katrina crossed over Florida before hitting Louisiana. Andrew did the same thing. Donna made a hard right turn over Florida in 1960 before heading north to blow hurricane-force winds into the mid-Atlantic and New England regions.

4) Irma is a Cape Verde hurricane. What does that mean? Hurricanes that have formed near the Cape Verde Islands have proven to be some of the most powerful and long-lasting storms to reach the Atlantic coast of the U.S. Cape Verde is a set of islands off northwest Africa with a population of about 500,000. The reason these type hurricanes can be so powerful is because a tropical wave forming over Africa can move westward over a large area of warm, open ocean basically unimpeded.

5) It is difficult to predict a hurricane’s path more than 3 days out. Why? Forecasters say there’s just too many variables that can affect a hurricane’s path. These factors include ocean temperatures, currents and storm activity elsewhere. Even using supercomputers errors can be in the hundreds of miles. In Irma’s case, a big, high pressure cool front moved down from Canada and into the Gulf of Mexico forcing her to take a hard right turn. Think about the forces of Mother Nature at work here. This is like a clash of Greek gods! Makes man pretty insignificant in comparison.