Exxon Mobil (NYSE: XOM) and UPS (NYSE: UPS) were among the companies that reported mixed earnings results on Tuesday.

Renewable Energy Group (Nasdaq: REGI) is scheduled to become the first U.S. stock to IPO this year.

The mainstream media is absolutely frothing at the mouth about the latest energy news to come out about the United States.

Today I'm going to tell you a personal story about how I learned the most important lesson of my investment career at a very early age.

One area of the market that has seen unusual strength this week, despite a horrendous distribution day for most other assets on Wednesday, is...

If the U.S. economy was growing at a stronger pace, if there wasn’t a lingering fear that financial institutions are still levered to the hilt (like MF Global and its insane 40-to-1 leverage), we might actually be able to brush off these European debt issues.

But growth in the U.S. does kinda stink right now.

I seem to recall EU leadership stating that it would not be dictated by the market. The point was that Europe needed to find the right solutions for its problems, and that it wouldn't be forced to rush that solution based on fluctuations in the financial markets... But that was before the yield in the 5-year Italian note hit 7.7%, as it has this morning.

Yesterday, a Euro Central Bank official was credited with sparking a rally when he said that the European debt crisis should be resolved in a year or two. That's a pretty flimsy reason for a rally, if you ask me.

Oil is more useful as an indicator than even stocks because of one thing: business.

Well, that didn't take long. It hasn't even been a week since EU leaders burned the midnight oil to reach a deal that might help Greece manage its debt and remain an EU member. And yet, Greece is already threatening to derail the process by wanting to put the bailout plan to a national referendum.

From a low of 1,075, the S&P 500 rallied 210 points, closing at 1,253 yesterday. That's a 16.5% gain in a month. And there are some pretty amazing statistics to go along with that gain.

Lower oil prices aren't really good news. Moreover, low oil prices don't even mean low gasoline prices - as you may have noticed lately.

Over the last year, overseas tensions drove the price of oil higher and had many people worried. Lately, the price of oil has plummeted on economic growth concerns.

"If you want to buy some boring stocks paying low dividends, just buy a bunch of oil companies."

A number of oil stocks are worth putting on your radar screen with the aftermath of Hurricane Irene barreling up the East Coast over the weekend.

The oil industry has been shutting down its refineries and storage facilities as it hunkered down for what is likely to be the worst storm to hit the region in years.

For investors, the work to uncover the oil stocks that will rise in price as a result of the storm began last Friday. It's time to review how a potential oil stock portfolio might benefit from any post-Irene repair work needed; and try to guess as to whether or not oil spot prices will rise as a result of the potential impact on America's oil infrastructure.

The price of oil is largely determined by supply and demand fundamentals, and oil refineries along the east coast are part of this equation. The Department of Energy breaks down the U.S. into five 'Petroleum Districts', and PADD 1, covering the East Coast, is by far the smallest with just 14 refineries.

How badly did investors want to put their cash into safe-havens during yesterday's huge sell-off? Money market rates went negative at one point during the day.

That's right it actually cost you a fraction of a penny to exchange your cash for shares of a money-market fund. And money-market funds are more similar to the dollar than any other the asset in the world.

Treasury bonds did pretty well, too. The iShares Barclays 20+ Year Treasury Bond ETF (TLT) was up 3.5% to $105. It's rallied 10% since July 25. Demand for Treasuries is high, investors aren't just fleeing risk. It's more like a stampede. Not coincidentally, the S&P 500 is down 10% in over the exact same period of time.

Financial markets like money. When the Fed was pumping cash in to the system via QE2, stocks moved relentlessly higher.

Yesterday's vicious sell-off was a snapshot of a market worried about a lack of money.

The debt deal passed in Congress yesterday calls for $2.4 trillion in government spending cuts over the next 10 years. We looked at some of the impact of reduced government spending yesterday...

Concerns over limited future oil production in the Middle East point to the growing importance of domestic energy production. The Obama administration, just like every administration before it, appears adamant that domestic energy production must grow.

While there remain concerns about the future of offshore oil exploration in the wake of the BP (NYSE: BP) disaster, land-based drilling for oil and natural gas is a sector likely to see continued growth.

One standout contender is Patterson UTI Energy (Nasdaq: PTEN), a Texas-based company that drills onshore wells for other companies that explore for oil and natural gas.

Natural gas is so laughably cheap right now and yet most investors are completely clueless about it.

How cheap is it?

Well, right now a barrel of oil costs about $95.

For the equivalent amount of energy, you'll pay just $24 for natural gas.

On an inflation-adjusted basis, oil has NEVER been as cheap as $24 a barrel. Obviously, natural gas is an inferior fuel, but on an energy-to-energy basis, it's almost impossible to find an instance in modern history when fuel was this cheap.

Last year at this time, I recommended one specific oil investment to buy in order to take advantage of rising oil prices.

Before I review this investment, I'd like to discuss why this time of year might be the best time to add to or build a position in oil investments.

As I noted this time last year, the third quarter (starting in July and ending in September) tends to exhibit the largest oil price increases for the entire year. This price action happens almost entirely because of seasonality in oil consumption.

Simply put: people drive more and so consume more oil in the 3rd quarter than at any other time of the year. The chart below shows the average oil price movement between 1978 and 2007 - so it excludes the highs of 2008 and the lows of 2009.

As you might remember, those two years would only exaggerate this trend further - so I'm certainly not cherry picking.

Over the weekend, new capital requirement rules for large banks were finalized. Known as Basel III, these rules will add as much as another 2.5% to some banks Tier 1 capital. That brings the total to as much as 9.5% for banks that are deemed to be too big to fail.

These new rules are designed to keep banks from over-leveraging and causing a repeat of the financial crisis. But it should also be clear that even a 9.5% Tier 1 capital requirement is not a big requirement. Banks will have no trouble raising their Tier 1 capital to the new levels by the 2019 deadline.

In reality, this is a token move and won't affect the banks much. It definitely doesn't do much to prevent another crisis. But it may be good news for banks stocks. One reason for the recent weakness in bank stocks is uncertainty of new financial regulations. With this Basel III agreement, some of that uncertainty is removed.

To wrap up this week, I decided to respond to some reader mail…

Cato asked: For a while I have been loading up on Bakken companies like BEXP. I was surprised about 6 - 8 weeks ago when oil price went up and BEXP went down. How can it be? I think a lot of your readers are puzzled so perhaps you could explain it in your newsletter?

Let me start by saying I am bullish on Bakken oil companies. Especially the small ones that are still ramping up their production.

The most important thing to remember about oil stocks, and oil in general, is that they are seasonal. Institutional investors buy them at certain times of the year, and sell them at others, regardless of what's going on with oil prices.

Stocks are trying to bounce back after 6 straight weeks of declines. As we noted on Friday, the S&P 500 didn’t even post 6 straight down weeks during the financial crisis. So this string of losses has been somewhat remarkable.

Of course, the decline over the last 6 weeks hasn’t been particularly large. As of last Friday’s close, the S&P 500 is down around 7% from its May 2 highs.

Oil prices jumped yesterday after the latest OPEC meeting in Vienna fell apart with no agreement about production increases.

I don't think it's any coincidence that Saudi Arabia's desire for increased production was not endorsed by Iran or Venezuela. Neither country is exactly America-friendly.

There is a budding divergence between economic data and corporate forecasts. We’ve seen a stark deterioration of economic data across the board. Manufacturing surveys have weakened, auto sales were down in May and then, of course, we got the icing on the cake with the pitiful employment numbers last week.

 

Economists and strategists have been falling all over each other as they lower their 2011 GDP estimates. (Of course, Daily Profit readers had a heads up, as we noted the change in the Fed’s outlook after the last FOMC meeting.)

As expected, today's Nonfarm Payroll number was just as bad as the ADP Payroll indicated it might be. Expectations were that 165,000 jobs were added in May. The reality is that we got only 54,000 jobs.

Soft patch, indeed.

The economy has been adding an average of 220,000 jobs for three months running. 54,000 is a big miss, big enough to push the unemployment rate up to 9.1%.

That wasn’t the first call for the end of the commodities bull market, nor was it the most serious.

We heard it proclaimed that 2008 was the official end of the bull market – no ifs ands or buts.

“Bull Market In Commodities at an End, For Now” – New York Times

The proof? Well, you might recall that gold, oil and nearly every other commodity on the planet was on the receiving end of a huge uptrend until early 2008, when the “bubble” began to deflate a bit. As the New York Times said in October of that year:

“Since July, when prices for many commodities peaked amid fears of a permanent shortage, the prices of wheat and corn - two cereals at the base of the human food chain - have dropped 70 percent. Oil prices have dropped 55 percent. Important metals like aluminum, copper, nickel and platinum have declined more than half.”

Again, I’ll use a chart of gold as a proxy for the “commodity bubble”:

The U.S. dollar and Treasury bonds are weaker today after the Group of 8 said the global economy was growing and the perception of Greek debt problems improved.

 

As we know, a weaker dollar sets the stage for higher stock and commodity prices. Oil is perhaps the best indicator of economic growth expectations. And its inverse correlation to the U.S. dollar is also airtight. So much so, that if you see oil rally, bullish economic commentary is usually not far behind.

Yesterday, we talked about bubbles and tech stocks. While it's possible to argue that certain sub-sectors of the Nasdaq may have some bubble-like valuations, technology blue chips are definitely not in bubble territory.

As I noted, the Nasdaq 100 (NDX), which is comprised of the 100 largest companies on the Nasdaq, is currently trading with a trailing P/E of 12.5, according to the Wall Street Journal.

"Restructuring" is just a nice way of saying "default." Basically, Greece would tell its creditors that it can't make full interest payments on outstanding debt (bonds), and that those creditors must accept new bonds with different interest rates.

When Fed Chief Ben Bernanke told us that he believed inflation was “transitory”, he was saying that commodity prices were higher due to Fed monetary policy.

 

When Bernanke went on to say that he would let QE2 end and not immediately fire up the QE3 engine, because the risks of further inflation were not being offset by gains in employment.

 

Put simply, Bernanke said inflation was all (or at least mostly) his fault.

More and more, strategists, commentators and investors are coming to the same conclusion: it's all about the U.S. dollar. When the dollar rallies, stocks and commodities sell off. When the dollar falls, then our favorite assets can rally.

 

It almost doesn't matter what the time-frame is. Evidence is mounting that even hourly moves for stock prices get their direction from the dollar's latest move.

Will inflation push the Fed to move earlier than it wants to? Or will a weakening economy encourage the Fed that more stimulus is needed?

Obviously, these questions are polar opposites. But it seems that these are the only choices of action for the Fed, assuming it wants to take action. It's more likely, however, that the Fed wants to see how the economy responds to the end of QE2. And I'll admit, I'm curious about that, too...

Citi has been a favorite of the high velocity trading firms, who using computer algorithms to scalp pennies from stock price movement. Being a low priced stock that did huge daily volume, Citi was perfect for the machines. And you could see it in the volume. There were days when Citi accounted for as much as half the shares traded on the NYSE.

But now, at $44, the machines will need to move on. That's going to mean less volume on the NYSE.

The "slowing growth" theme we've been discussing has now worked its way into the headlines. Today's ADP report that the private sector added a less than expected 179,000 jobs in April is being billed as a sign that the recovery is not moving as fast as we'd like.

Today's oil inventory report is also being interpreted as measure of slowing growth. Crude inventories rose 3.2 million barrels last week, higher than expected.

Oil price initially dropped this morning, but quickly rebounded. The dollar is also enjoying some upside today. It will be interesting to see if oil, and stocks, can maintain their positive bias.

As I discussed on Friday, we’ve gotten some economic data that is less than robust. Q1 GDP growth was just 1.8%. And the Fed has lowered its full year growth forecasts.

Citigroup (NYSE:C) reported $0.10 in earnings for the first quarter this morning. Analysts had been expecting $0.09, so it looks good on the surface. To achieve its $3 billion quarterly profit, the bank released $3.3 billion from its loan loss reserves.

 

Citi also came in light on revenues.

 

I still think it’s a mistake to allow Citi to pay a dividend when its current business is not profitable. Simply returning loan loss reserves to the balance sheet is not a sustainable business model.

Oil prices are back to moving higher as Kuwait has suspended exports due to sandstorms. Also underlying oil's move is March consumer spending numbers. While the headline retail sales number was up 0.4% vs. expectations of 0.5%, sales gains excluding gas and autos were better than expected.

 

We've discussed the relationship between spending and oil prices. The market clearly likes the implication that higher oil prices have not impacted spending much.

MasterCard Spending Pulse, a data-tracking service, reports that, for the week of April 1, Americans bought 2.4 million gallons less than the year before. Another service, Oil Price Information Service, says that gas stations are reporting sales falling by around 3%.

The best case scenario for falling oil prices is that they fall because supply is ample. The worst case is that oil prices fall because consumers are spending less. That inevitably brings up the fear that economic growth will slow on lower consumer spending. And when growth is already tepid, that’s clearly not good.

PIMCO’s Bill Gross is back in the headlines. We’ve discussed how Gross, the biggest bond investor in the world, has sold all of Treasury bond holdings. Now, it’s been revealed that Gross is betting on further declines for Treasuries.

That’s right – he’s now short around $7 billion worth of Treasury bonds. That sounds like a lot, but it represents just 3% of PIMCO’s $236 billion Total Return Fund.

Stocks look poised to push higher again this week. The S&P 500 is on the cusp of a break above resistance at 1,335. And that would likely set up a test of the post-crash highs at 1,344.

But as Jason Cimpl told his TradeMaster Daily Stock Alerts members this morning, earnings are coming and stocks have been relentless since recent lows:

Although the market participants have seemingly not cared about economic data for the past few weeks, the market will not move higher if earnings disappoint. And earnings season will officially begin next week. Even though the bulls look unstoppable now, and to a large degree they have been over the past eight months, a poor earnings season will awaken the bears.

Additionally, I would prefer the market fall to 1301, which lets the bulls regroup before they take stocks to new highs.

Alcoa (NYSE:AA) starts earnings season next Monday, April 11.

The last few days of the first quarter are here. And what a quarter it's been! We saw the end of two governments in the Middle East (Egypt and Tunisia). Two more are teetering on the brink (Syria and Libya). We saw oil prices spike above $100 a barrel. We saw the Prime Minister of Portugal leave office. There was massive flooding in Australia and a devastating earthquake/tsunami in Japan.

 

And amazingly, stocks look poised for an end of quarter run that should challenge 1,335 resistance on the S&P 500. Who knows, we may even see new highs above 1,344 this week.

The Fed is set to release data about lending from its discount window during the financial crisis some time this week. Conspiracy theorists often point to the Fed's overnight lending as a sure sign that the financial markets are manipulated with cash infusions by the Fed. Really, in a general sense, these open market operations are there to provide short-term liquidity to qualified banks to help them settle daily transactions. This lending is also used to manage monetary policy on a daily basis.

Today, with historic events unfolding in Libya and the price of oil making headlines, I'm inviting Kevin McElroy to speak out and share his perspective. Kevin is Editor of Wyatt Investment Research's daily letter, Resource Prospector, and follows the commodity markets on a daily basis.

I'm no nuclear expert. Far from it. So the reports that the pools where spent nuclear fuel rods are stored have no water, that the rods are completely exposed to the atmosphere and releasing radiation are frightening.

And reports that many countries including the U.S. are advising their citizens to leave Japan aren't helping.

The Bank of Japan pumped $183 billion in yen yesterday to try and contain the damage to the Japanese economy and stock market. It didn't work.

 

The Nikkei dropped over 1,000 points in Tuesday trading, better than 10%. That's after a 5% drop Monday.

 

That qualifies as a crash. And it's no "flash crash", either.

Interestingly, some prominent strategists like Laszlo Birinyi, Bartion Biggs and Ken Fisher remain bullish on the economic recovery and the stock market.

We have noted here in Daily Profit that stock valuations have not gotten out of hand and, even though we are experiencing some correction/consolidation, the upside story has not played out yet.

Nomura Securities stirred things up recently by saying that oil prices would spike over $220 a barrel if unrest spread to Syria and Iran. Some investors are taking that bet.

Bloomberg reports that the open interest for June 200 call options for oil has gone from 1,500 to over 8,000. It might seem unlikely that oil will go over $200 in just 3 months. But if it does, these traders will make a lot of money.