Oil price jump, U.S. Q4 GDP growth make Friday markets happy

Like Bernie's and Hillary's competence, both market situations are suspicious. But bulls are happy and shorts are getting squeezed, so stocks are looking positive. For now.

One idea for saving American capitalism. (Cartoon by Branco, reprinted by arrangement and with permission)*

WASHINGTON, Feb. 26, 2016 – Both West Texas Intermediate (WTI) and Brent crude oil contracts continued to get bids in early Friday trading, with WTI up a buck at $34.07 and Brent doing even better, up $1.27 at 36.56 as of 10 a.m. EST. Oil had seemed bent on heading back down at the open, but reports of increased U.S. demand for gasoline, added to persistent but likely false rumors of some kind of OPEC production cut agreement started squeezing the shorts, and hence the higher prices.

Brent looks likely to close Friday with its first one-week gain in a month. But with futures contracts expiring next week, who knows how things will go headed into the first week of March? More OPEC cut dreams, anyone?

Read also: Wednesday’s markets: Oil isn’t everything–it’s the only thing

In the U.S., shale oil drillers are slowly, reluctantly suspending operations, given that they’re losing their balance sheets, not to mention their collective derrières, at the current, abnormally low per bbl. price. Regarding this forced decline in production, at least one key industry player lays the whole situation on the line, according to CNBC.

“‘Now you’re starting to see the decline, and I believe you’re going to continue to see the decline as you move through 2016,’ said Devon Energy CEO David Hager to an audience at the annual IHS CERAWeek energy conference this week.

“‘Right now to summarize it: $30 and $2 does not work — $30 oil and $2 gas,’ he said. “Most of us are in place to make sure we can survive, and make sure we are in place when it turns.’”

Read also: Tuesday markets: Oil giveth, oil taketh away

This morning’s latest batch of government figures also showed that the U.S. Q4 gross domestic product (GDP) increased at a 1 percent annual rate, which was a bit higher than the earlier-reported 0.7 percent estimate put out by the Commerce Department.

We’ve grown suspicious of nearly all government numbers these days, which is tough, since those figures used to be regarded as reliable. Now they’re nearly always in revision, with the numbers the administration likes being trumpeted in the media, which the downward revisions tend to get little in the way of verbiage or column inches. We dread to think what will happen in this department if Bernie or Hillary should take the Washington helm in 2017. (So let’s not.)

Ultimately, it’s these widely reported numbers, however, that seem to be dictating the Fed’s story. The good news is that if they’re true, the economy may not be teetering on the brink of recession as many think. The bad news is that—if this is actually true—the Fed will use it as an excuse to jack up interest rates sooner rather than later, which action is likely to tank the market once again.

It’s all this ongoing confusion that continues to roil markets and make it tough for anyone or anything other than a high-speed computer trading algorithm to make money in this market. But we do keep trying.

Days like this can be encouraging. Due to all the happy talk, stocks opened sharply up this morning at the opening bell. As of 10 a.m., they’re backing and filling, however, with all three major averages, the Dow, the S&P 500 and the NASDAQ barely above the flatline. The reported news is nice, if you believe it.

But traders are also scared these days to go into weekends heavily invested, as bad news tends to hit the tape after Friday’s close and before Monday’s opening bell—meaning if there’s a big dump of bad news, holders of too much stock will get hosed on Monday. This phenomenon will likely remain in effect until the Bad News Syndrome recedes—an event that we can’t see on the horizon.

We’re not even going to try to predict how Friday’s markets will close. Up, we hope, since we could use the gains. But then again, hope, as we’re so often told, isn’t a strategy. Yet that’s mostly what markets have been running on for well over a year. If someone can come up with a more productive idea for making money, please let us know and we’ll share your brilliance and insights right here.

Meanwhile, we have things to do today that have nothing to do with markets, so maybe now is a good time to get started.

See you Monday.

*Cartoon by Branco. Reprinted by arrangement and with permission via LegalInsurrection.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17