Friday April 7 2017
The Red Line is Re-Drawn
Friday’s jobs report, however, will likely be overshadowed by late Thursday news that the U.S. had launched about 60 cruise missiles at a Syrian government air base. This comes after a chemical attack earlier in the week against civilians.
Shortly after the report, stock futures were lower with Dow futures down about 60 points, S&P 500 futures off 7, and Nasdaq futures down about 15. Overnight, Dow futures had dropped by as many as 130 points but ahead of the jobs report had moved back to little-changed.
Gold prices were higher in early trade on Friday, up about 1%, and oil prices were also higher, rising about 0.8%.
Yahoo Finance, Friday April 7, 2017
For the last eight years, the US has been ‘leading from behind’ to use the Administration’s own phrase. The refusal to enforce Obama’s Red Line, the use of chemical weapons by Syria’s Assad, led to what the Wall Street Journal today terms “the Syrian catastrophe.’
It appeared President Trump would follow a ‘hands off’ approach to Syria. And then the evidence of more chemical attacks became apparent. Things quickly changed. Nikki Haley, the new UN Ambassador, quickly called out Russia for its support of Assad. On the video, one sees the Russian UN Ambassador hanging his head in an unresponsive state. Photos of gassed children were on display.
Meanwhile the media covering the visit by Chinese President Xi this week, pronounced that Trump would be dealing ‘with a weak hand.’ But while the dinner was proceeding, 59 cruise missiles were launched against the Syrian base thought to have delivered the chemical attack.
North Korea’s threats against both its neighbors and the USA are on the agenda with President Xi. And so all of this came together overnight. Secretary of State Tillerson announced that Assad has no future in Syria.
All of this has been orchestrated of course to test Trump and his team. Now the world has an answer.
The Pentagon used its favorite weapon of choice with the cruise missile. No American pilots were in danger. The damage actually inflicted on the Syrian base is not the point. The statement that the USA is back in the world diplomatic game is the point. Again as the WSJ puts it, thugs around the world will surely take notice.
Recall that oil is one-half of the Russian economy. And Trump, unlike Obama, is doing all he can to produce US oil production, and decrease US dependence on foreign sources. That also sends messages to both the Mid-East and Mr. Putin.
How is the sociometer of the stock and oil markets responding? After giving back the 200 point rally earlier this week and falling last night, stocks are recovering and then falling a bit Friday morning. Crude oil is up22cents to $52.92. The FRAK ETF holds recent gains at $16.55. Abraxas AXAS jumped has topped $2 to $2.28. Oil service XES ETF is steady at $$20.16.
Crude needs a close over $52.33 to turn the intra-month trend up. That price is at the lower edge of the price consolidation since December. That range is $52.33 - $55. Violence in the Mid-East usually firms prices that could happen. The next cycle low for oil should occur in September-October this fall.
Natural gas has been on a tear closing yesterday art $3.33. A close below $3.20 turns the trend down. Resistance is now at $3.45-$3.50.
While I have taken a good bit of criticism for my suggestion stocks were topping while rising since November, the weaker jobs report today, continued store closings, and unrest around the world suggest negative mood is on the rise. Ferrari and Bugatti have just introduced their most powerful cars ever. Too bad the Beach Boys are not recording any new material. The most powerful exotics ever would be a good bookend piece to the tune Shut-Down. That song was about a 413 cubic-inch Dodge Dart (good grief!) and fuel injected Corvette Sting Ray. It was released in 1963 as the Dow was headed to its first ever 1,000 record. I mean, really, has anyone recorded a song about a Prius?