Groundhog Day

  • February 2, 2001
  • Marc Dupee

Today is Groundhog Day and energy traders seemed to take
their cue from the marmot that came out of his hole after a long winter sleep to
look for his shadow. The myth of Groundhog Day continues that if the creature
sees his shadow, he regards it as an omen of six more weeks of bad weather and
returns to his hole.

With little other news to drive energy markets higher,
traders appeared to use the groundhog’s forecast of more inclement weather to
drive nearby energy contracts more than 4.5% higher. Heating fuel led the
energies higher on forecasts that a short blast of arctic cold will descend upon
the central part of the US, returning temperatures to the record cold levels
seen in the last two months of 2000. Natural gas
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popped open, came back to fill the morning gap, and then bolted to set new
intraday highs before closing .363 higher at 6.743. Heating oil
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.0430 to .8214 and crude oil
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The Labor Department fired another warning shot that the economy is slowing,
culminating a heavy week of economic reports that saw the Fed cut short-term
interest rates by 50 basis points. Although unemployment jumped to 4.2%, a
16-month high, and reflected a spate of recent layoffs that have made front-page
news, an unexpectedly high number of jobs were added in the service sector,
which the market interpreted to mean the economy may not be as bad as everyone
thinks. 

Stock index futures sold off as a relatively
stronger-than-thought economy will make the Fed less inclined to stay on the
rate-cutting warpath. 
Nasdaq 100 futures
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through two limit-down levels to close 139.00 lower at 2488.50, down 5.29%.
Spooz
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fell 150.0 to 10,895.0.

Debt futures readjusted to the prospect of less
aggressive easing as well: T-bonds
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and

10-year notes
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Euro FX futures
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Swiss francs
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report, accelerating after hitting Pullback From Lows
triggers to close .0065 and .00710 lower, respectively. The US added four times
more jobs than expected last month, while at the same time, European business
confidence fell to a 15-month low. 

The news worked to alter perceptions that Europe will
outperform, relatively, the US economy. There is also the view that traders have
not fully factored-in how a slower-growing US will effect Europe’s economies.
Much of Europe’s economic rebound has been because of increased exports to the
US. The US is the destination for approximately 14% of Europe’s exports. 

Soybean oil
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yesterday’s expansion bar, a bullish sign. Bean oil rose sharply yesterday on
the prospect of a European Union ban on animal fat in livestock feed rations.
Bean oil closed up .0600 at 15.0700.