With the mid-term elections only a few days away, crude oil futures continue to hug the $58.00/bbl mark. Yesterday, crude oil futures traded down after the EIA inventory report revealed a build in crude inventories.
Kuwait's oil minister said OPEC should wait before making another supply cut. Oh is that so? Wait until when? After the election?
Now that additions to the Strategic Petroleum Reserves have been temporarily suspended (another pre-election move), its only natural to assume that the reserves will resume their supply build after the elections.
In the futures markets, the CFTC (Futures and Options Report) has revealed that large speculators have been adding to their long positions in crude oil. In the past, this has been a good indication of the direction in crude prices in the months ahead.
On the Macroeconomic front, the unemployment rate fell to a five-year low of 4.4 percent in October as the economy added 92,000 new jobs. Treasury's sold off as inflation fears rose, and the yield on the 10-year treasury rose to 4.596%.
Also this morning, weaker productivity growth in the U.S. unexpectedly slowed in the third quarter, driving labor costs higher. Productivity was unchanged and the price of labor rose at a 3.8% clip. For the 12 month period through September, labor costs were up 5.3%. This will provide an interesting situation for the Federal Reserve since their forecasts were for inflation to subside.
As for the mid-term elections, the odds favor the GOP losing control of the House and retaining the Senate. Not to worry though, losing both the House and the Senate is usually a positive for the stock market.
Here are the market returns for stocks by party of the President and majority party in congress from 03/04/190110/23/2006; Sources: van Kampen, Ned Davis Research
Republican Pres, Dem Congress: +6.37%
Republican Pres, Rep Congress: -- 1.54%
Democratic Pres, Dem Congress: +6.53%
All Periods Buy & Hold: +5.34%
