friday wrap, august 22
market vibes
Two sentences would sum up trading in New York today.
Powell capitulated.
“Shifting economic risks sharpened the case for a rate cut.” Hmmm. Actually, CPI core and PPI shifted away from the case for a rate cut last week. Employment data has been in decline for a year, especially ghastly BLS downward revisions. Something obviously changed since the last FOMC just 22 days ago. I wonder what that might be?
In the markets
How unfair it is for humans that the text of Powell’s speech was released at 10:00 AM, read by word algos, and scooped within 5 to 50 microseconds. It takes 50 milliseconds for a human to blink (10,000 to 1,000 times slower).
At any rate, the Dow closed at a record high of 45,631.74. The S&P missed by 3 handles; the NDX hit a new intraday all-time high early in the day but missed a record closing high.
In daily data, S&P futures rallied on relatively low volume, considering the rip on Powell’s text. Do the margin clerks care if volumes are low? No, they do not. The index was up => .015%.
Gold took its time catching up to stocks, rising .01%. Silver was up .02%.
The dollar fell 0.01% (chart below). Bitcoin rallied 4%, and bonds were up < 1 handle.
In oil markets, the October/November/December fly is in a vertical decline and trading at the lowest level since May. This means prompt oil in storage is declining relative to deferred oil scheduled to arrive in the future.
The September/October heating oil front spread is weak ahead of the last trading day next Friday.
The September/October RBOB front spread had an outside reversal down today.
WTI flat prices were up $2.50 this week on falling OI and light volume. Crude is in mild and declining backwardation, rangebound with mixed internal decay in the complex.
The strength in oil is in refining margins because crude is relatively weak. Considering margins are higher than they have been for some time, weak and declining front spreads imply ample supplies of oil coming into storage.
According to Baker Hughes' rig count data, the purge of weak wells might be over.
Total Rigs: 538 (down 1 from 539 the previous week).
Oil Rigs: 411 (down 1 from 412 the previous week).
Gas Rigs: 122 (unchanged from the previous week).
In other small beer, Trump bought 10% of INTC for nothing. Of course, INTC is getting something, but no one is offering the details. My guess is we might consider buying some INTC. They make chips, and they’re awfully cheap for a company that makes chips, especially one with the US Treasury as a shareholder.
my vibe
I’d like to thank readers for the lively, dignified, albeit passionate at times, debates in comments these past 2 days. You never learn anything listening to people you agree with.
Bon weekend!
JJ
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Charts and data CQG and Bloomberg
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"I’d like to thank readers for the lively, dignified, albeit passionate at times, debates in comments these past 2 days. You never learn anything listening to people you agree with."
Since quite some time I think about a proper characterisation of the author of this substack.
Just came to my mind:
Gentleman Writer.
Thanks a lot JJ
For 2-3 years I have heard that drilling rigs are far more efficient than they used to be. So I wonder if B-H's raw number of rigs is as valid and reliable as it used to be. Are we now comparing apples to oranges? A question/thought.....