Just last week I wrote about the possibility of a changing of the guard on wall street. Inside the post I wondered aloud whether the short-term large losses in oil prices and oil stocks, and commodity prices and commodity stocks while the rest of the market charged higher would become a true change, or just another headfake. In that post I spoke of the fact that there had been many headfakes in this area in the past, and that I would believe it when I saw it. Indeed, this was just another headfake. In less than a week oil has blown through $120 a barrel, and commodity prices and stocks are back on the increase, while the rest of the market lags behind.
Today the Dow lost 88.66, the Nasdaq fell 12.87, and the S&P 500 lots 6.41 points. The strongest sectors on the street were (you probably know before I even write this) basic materials, and energy stocks. Another sign that things were reverting back to old times was the weakness in financials and retailers.
Potash (NYSE:POT) shares rose 3.9% and Bunge Limited (NYSE:BG) rose 4.12% as the agricultural sector benefited from more gains in commodity prices. Gold prices went up nicely today, and many gold stocks did quite well. Freeport McMoran (NYSE:FCX) shares surged 5.23% to lead that group. Steel stocks were led by U.S. Steel (NYSE:X) which jumped 6.23% on strong volume.
Energy stocks were modestly higher on the day as oil prices finished above $120 a barrel for the first time ever. Weatherford International (NYSE:WFT) shares were higher by 2.36%. EOG Resources (NYSE:EOG) shares jumped 3.75% on the day. Chesepeake Energy (NYSE:CHK) continued its recent tear, charging higher by another 3.93% today.
Some of the stocks that were most hurt in recent months by the credit crunch were hit hard again today. Washington Mutual (NYSE:WM) fell 7.88% on the day. Fannie Mae (NYSE:FNM) shares were down 4.1%, while Freddie Mac (NYSE:FRE) plunged 5.8%.
The retailers were hit pretty hard today as well. Kohl's Corporation (NYSE:KSS) lost 3.81% on the day. Nordstrom (NYSE:JWN) shares finished lower by 3.32% on slightly larger than average volume. Tiffany's (NYSE:TIF) fell by 3.48% on the day. All of these names are well off their 52 week lows hit a few months ago, but have shown some weakness the last few days.
Unfortunately this kind of trading means there is no relief in sight for the American consumer. Gasoline prices should rise to even more in the coming weeks, and food prices will likely do the same as ingredients become much more expensive. This is also a difficult time for restaurants, which are having to pay outrageous amounts for ingredients such as cheese and rice, lowering their margins considerably.
It seems that the situation that has set itself up in commodities is that they hit new highs for a few days in a row, then have a quick selloff, only to regain everything they lost within 3 or 4 trading sessions. The headfakes just keep on coming. Until something major changes from the economic supply and demand picture expect this kind of trade to be the norm.
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