The morning trade featured some significant fundamental data with the U.S. 2nd quarter GDP missing expectation, natural gas inventories shrinking and jobless claims continuing to dwindle.
The soft GDP reading (2.3 vs. expected 2.6) came on the heels of the FOMC decision to leave rates unchanged yesterday though seemingly intent on at least one 2015 rate move. Less than expected GDP would appear to have the effect of lessening the likelihood of a sooner rather than later rate hike. However, one would assume the committee was already privy to this information going into the meeting and if it were to have a pronounced effect on their leanings, it may have been evident in the press release yesterday. The market in general has taken the GDP miss in stride with WTI still up on the day. Equities are down only nominally and bond yields have gone lower but seem to be stabilizing.
WTI remains just above 49 dollars currently as the big draws this week in inventories continue to filter into the price discovery. We are seeing some industry reaction to the recent decline in WTI from 60 dollars to 47 dollars as some of the majors like Shell and Chevron are instituting secondary rounds of austerity measures, this time shedding significant numbers of employees in an effort to make up the slack from the depressed price. Gasoline and distillates remain higher on the day as well with demand for gasoline state side at several year highs driving the price discovery higher. If the energy markets can remain close to unchanged on the day or higher in the face of the worse than expected GDP report then that would seem to be some confirmation of an exhausted bear market preparing to trade higher in coming sessions.
The natural gas got more bullish news this morning with the inventories showing only 52 BCF vs. the expected 54 BCF. Granted that is not a significant miss in expectations but declined nonetheless for the third week in a row with the hottest part of the year upon us. Inexplicably, the market has sold off about 8 cents on the day trading at 2.78 after trading as high as 2.895 shortly after the report. These mildly bullish reports seem to be feeding new short positions rather than building momentum higher as the past three rallies due to lower than expected builds have been met with semi-dramatic reversals. That being said, the market remains firmly within its recent range after spending most of the week grinding higher.