Friday, March 21, 2014
The stock market today appears on track to build on Thursday's
gains as the perception of a somewhat hawkish turn for the Fed is
offset by expectations of a better economy. Stocks reversed
Wednesday's post-meeting losses in Thursday's session and will
likely end the week on a positive note.
The markets were spooked by Janet Yellen's 'six month' comment. But
the realization seems to be sinking in that the Fed will remain
data dependent and will not be on some pre-set timeframe. And as
long as the economy keeps improving in-line with the Fed and
private-sector projections, then higher growth can offset the
restraining effects of higher interest rates.
Recent housing, manufacturing and labor
is indicating that the soft patch over the last couple of months
was weather-related. Next week's New Home sales, Durable Goods and
Personal Income & Spending reports all pertain to February and
will likely be no different from what we had seen the month before.
But the expectation is that we will start seeing signs of
improvement in March data that comes out in April.
While weather was a headwind for the broader economy the last few
months, it appears to have turned around the outlook for natural
gas. Strong heating-related demand has brought down the commodity's
availability enough that prices will likely remain elevated through
the spring and summer days when demand is seasonally weak.
Thursday's data from the Energy Information Administration showed
that the level of natural gas in storage fell to 953 billion cubic
feet, the first under-one-trillion cubic feet reading since 2003.
This improved outlook is showing up in greater demand for drilling
activities, particularly the more challenging horizontal and
lateral drilling. The recent strong momentum in the stock prices of
onshore drillers like
Helmerich & Payne
) and others is a reflection of this trend.
Director of Research
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