Equites rallies yesterday as energy shares surged, a surge predicated by a 5.8% jump in crude. For the month of April, energy shares in the S & P 500 have gained 6.8%, on track for the best month since January 2013 according to Bloomberg.
The negative oil narrative still exists even though prices are up almost 30% since their mid-March lows and prices are currently at 2015 highs, close to the $60 quarter end price target that OPEC and Saudi Arabia projected about three weeks ago. For all the stated reasons for yesterday advance—falling dollar and oil production and Iranian discord—a possible supply disruption was not discussed as a possible catalyst for the increase.
There were ample stories of Iraqi refineries burning, Yemeni fighting, chaos in Libya, etc. but as stated above none of these events were suggested as a possible reason for rising crude. Can I rhetorically ask is the accepted market narrative missing a distinct possibility of occurring given that all did not suggest oil would fall 50% in six months?
It is my first-hand experience when all fail to suggest something will occur, consensus will then adopt the inverse narrative perpetuating the unexpected narrative for almost forever.
What will happen today? The earnings parade continues, results of which is meeting much dumbed down expectations. As expected most companies have commented about the rising dollar and the impact upon results.
Last night the foreign markets were mixed. London was down 0.30%, Paris down 0.49% and Frankfurt down 1.47%. Japan was up 0.08%and Hang Sang up 0.44%.
The Dow should open moderately lower as 14 S & P 500 companies post profits today. The consistency of the few releases to date is the effect of the dollar. Will today’s narrative be much of the same. I also ask will the Greek narrative reemerge? A year ago if today’s headlines were printed about Greece, the markets would be facing considerable volatility. The 10-year is up 4/32 to yield 1.88%.