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Equities extended their gains buoyed by improving Chinese data, better than expected earnings from a large money center bank and data that did not threaten the monetary policy.

Stocks were also encouraged by the Beige Book—or the statistical compilation utilized at the upcoming Fed meeting—indicating the economy continued to expand from late February to early April, boosting employment and delivering some long awaited upward pressure on wage and prices.

Weekly oil inventory surveys suggested an increase in stores but such did crush prices after the huge run up given that US production is now at the lowest level since October 2014.  Because of massive infrastructure cuts, it is expected US production will continue to drop significantly in 2016.

Regarding OPEC, will there be a production cap?  As noted many times I think such is symbolic given that OPEC, Russia and the other countries meeting next week representing about 75% of global production is already pumping at peak capacity.

According to Bloomberg, OPEC production is expected to be frozen around January levels.  For a myriad of reasons, March’s production was 487,000 barrels a day below January’s level, the result of supply disruptions caused by Caliphate inspired violence.  Can production rise back to January’s?

It depends upon funds available to repair damaged infrastructure and replace spent reserves.

What will happen today?  There are several high profile financial earnings, the CPI and weekly jobless claims.

Last night the foreign markets were up.  London was up 0.04%, Paris up 0.16% and Frankfurt up 0.19%.  China was up 0.51%, Japan up 3.23%and Hang Sang up 0.85%.

The Dow should open flat.  Goldman reported last night a gauge of the 50 most shorted stocks posted its largest two day jump tin almost two months thus suggesting some of the recent the gains is a function of short covering.  As noted the other day short interest is around 4.3% or about $1 trillion.  It is nominally off the 4.4% apex reached in March.  In August short interest eclipsed the 4% level for the first time since 2008.  The 10-year is off 6/32 to yield 1.79%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.