The polar vortex caused heavy snows across the middle of the U.S. and record cold temperatures in Texas. Consequently, due to unprecedented electricity demand, electric utilities, from North Dakota through Texas and into Mexico were forced into rotating blackouts. Some refineries and many oil wells in Texas were shut down due to cold temperatures. Even water supplies were disrupted. While most of the continental U.S. has two main power grids, eastern and western, Texas is unique with it’s own grid and highly deregulated electricity markets. Spot prices in Texas for electricity and natural gas soared to astronomical levels. This caused Texas Governor, Greg Abbott, to take the unprecedented move to limit natural gas from leaving the state through February 21st. However, by weeks end, the situation was improving.
Most stock indices ended the week modestly lower despite good earnings announcements. Bond yields have been increasing in anticipation of further stimulus and this is starting to keep a lid on stock prices.
Treasury yields rose with the 30-year bond yield closing at 2.136% and the 10-Year note closing at 1.340%. Crude oil fell to $58.96 a barrel while natural gas rose to $3.072 per MMBTUs. The U.S. dollar index fell to 90.36 and gold fell to $1780.70 an ounce.
In the economic numbers this week:
- Japan reported that the gross domestic product grew at an annualized 12.7% rate in the fourth quarter but contracted 4.8% for calendar year 2020.
- The Commerce Department reported that consumer spending rose 5.3% in January, the first increase since October, on the heels of $600 stimulus payments.
Source: U.S. Census Bureau
- The Federal Reserve reported that Industrial Production rose 0.9% in January.
- Manufacturing production rose 1.0% and is only down 1.9% from pre-pandemic levels.
- Utility production declined 1.2% in January.
- Oil and gas well activity increased 11.3% but is down 50% from a year ago.
- The Commerce Department reported that U.S. housing starts fell 6% in January from December for the first decrease since August.
- Single-family starts fell 12.2%.
- Multi-family starts rose 17.1%.
- Building applications, an indication of future housing starts rose 10.4%.
- The National Association of Realtors reported that existing home sales rose 0.6% in January from December. From a year earlier, existing home sales were up 23.7%. Home sales were boosted by ultra-low mortgage rates but were constrained by higher prices and low inventory of existing homes.
- The Random Length Lumber Futures for March hit a record $1004.90 per 1000 board feet, double where it was three months ago. This happened despite Canadian Lumber tariffs falling from 20% to 9% in December.
- The Labor Department reported:
- A seasonally adjusted 861,000 workers filed initial claims for unemployment in the week ending February 6th. This was an increase of 13,000 from a revised 848,000 the week before.
- The 4-week moving average, designed to smooth out volatility, was 833,250, an decrease of 3,500 from the previous week’s revised average.
- Continuing claims fell from a revised 4.6MM to 4.5MM in the week ending February 6th.
- A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 19.7MM to 18.3MM the week ending January 30th.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf . Also, the EIA reported in the prior week:
- Field production of crude oil fell from 10.9MM barrels per day to 10.8MM BPD.
- Natural gas storage fell 237BN cubic feet and is about at the average level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs fell 1 to 305. The number of active natural gas rigs rose 1 to 91.
- Factset reported, with 83% of S&P500 companies reporting, that the blended earnings increase from Q4 2019 is 3.2%.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.