Bipolar stocks back in their happy place in Thursday trading

Increasing likelihood of continuing zero interest rate policy, potential recovery in commodities provide tailwinds today to pathologically confusing markets. Utilities, oil, commodities, banks up big time.

New FirstEnergy substation and transmission line under construction in Harrison County, W.Va. (CC 2.0 via First Energy Flickr page, modified to fit format)

WASHINGTON, Oct. 15, 2015 – Wednesday’s trading action had most stock sectors looking like they were about to return to their usual 2015 Slough of Despond. But, as the lyrics to a popular old song once declared, “What a difference a day makes.” Indeed, most stocks seem to be hitting on all cylinders Thursday afternoon, even those that have recently been beaten to a pulp.

Read also: Tuesday, Wednesday markets meander as stock rally stalls

Counter-intuitively, bank stocks seem reasonably happy, despite the Fed’s apparent pullback in its 2015 interest rate increase scenario—an action that continues to delay bigger profits via loan margins in that sector. Utilities and even junk bonds also seem to be back in their happy place.

Despite another inventory build, oil stocks, including refiners, are mostly up. Gold and silver seem to be catching a bid. And even many colossally oversold emerging market stocks are singing a happy song, at least today, reminding us of that line from Robert Browning’s “Pippa Passes,” “God’s in His heaven—/All’s right with the world!”

The NASDAQ, the S&P 500 and the Dow are all up nicely as of 2-ish Thursday afternoon, with the Dow’s recovery from yesterday’s smackdown—due largely to Walmart’s (symbol: WMT) crushingly bad earnings forecast—seemingly a thing of the past, as fellow Dow components Nike (NKE) and Boeing (BA) bolstered that average nicely.

We’re still suspicious of seemingly irrational exuberance like this, particularly after experiencing such a lousy year so far. And it won’t take long for stocks to get into a short-term overbought condition, as they were last week, which can encourage mechanical selling and shorting to begin anew.

But perhaps, even as we appear to be teetering on the edge of some kind of recession, the stars are aligning positively again. If the U.S. essentially decides to remain within a zero interest rate policy (ZIRP) zone, if China has finally worked through its huge and foolish commodity hoard, and if we really do get a new president—any president—in January 2017, maybe the sun’ll even come out “Tomorrow, Tomorrow.”

Part of the apparent increase in interest in commodities over the last few trading days—or weeks in some cases—might also be due to the plateauing or decline in the real and perceived value of the U.S. dollar. That would result in increasing commodity prices, at least in dollar terms, halting what has been an essentially deflationary weakness in pricing in this sector, a very real issue that has had politicians, economists and at least some Fed governors, very worried indeed.

Increasing commodity prices—also a plus for gold and silver bugs—might also eventually lead to some kind of inflation, which, in turn, might actually, for real, lead to a gradual normalization of interest rates.

As for now, let’s enjoy the current respite—however brief—in the spirit-crushing action that’s characterized investing in 2015. Enough is enough. At least for today.

Today’s trading tips

Well, these are more ideas than tips. Since it’s an up day on Wall Street, our itching buying trigger fingers might wait a bit, but we’re finally beginning to look at a few stocks that could benefit from a positive term, at least through Christmas trading, 2015.

As we’ve noted, certain sectors seem to be getting happier at last. As for banks, we’re already back in the shares of regional banker First Niagara (FNFG). FNFG management recently announced they’d engaged Goldman Sachs to advise them on a possible sale of the company to a competitor. Shares have strengthened since that announcement, which may or may not result in anything.

That said, FNFG is a tempting target, and usually once any company is defined as “in play,” someone, somewhere is likely to bid at some point. So we’d like to be there when that happens.

Utilities, always one of the conservative Maven’s favorite sectors, seem to have bottomed after our recent, prolonged interest rate hike scare. Battered shares of the stumbling, Ohio-based giant First Energy (FE) seem to have righted themselves at least and the company’s fat 4.4 percent dividend now seems secure. So maybe a little nibble here?

Likewise, perhaps Florida-based Next Era (NEE) and Chicago-based Excelon (EXC) shares could prove tasty as well. The former is close to executing its deal to acquire Hawaiian Electric (HE) and the on-again, off-again acquisition by Excelon of controversial Washington, D.C.-based electric utility Potomac Edison (POM) appears to be on again after EXC apparently succeeded in placating those crafty socialists in the D.C. government who’d come close to torpedoing an earlier deal.

The successful closing of either or both these transactions would likely be immediately accretive to earnings, which is always a good thing, even in a poor market environment like 2015.

Finally, dare we say it, there’s some evidence that those coal companies that still remain alive—even after Obama and his increasingly SS-like EPA thugs have openly attempted to destroy them—may have a bit of life left in them after all. While several are in bankruptcy proceedings and therefore off-limits as far as we’re concerned, two of them, the giant Peabody (BTU) and lesser known Cloud Peak (CLD) have been getting a bid lately, including the former.

Both companies have to be regarded as speculations at the moment. But Peabody’s Australian coal business is showing signs of life again, given hints that the Chinese economy—a big consumer of Australian coal—might be about to end its stay in the fiscal ICU.

And western, mostly-anthracite (“hard coal”) miner Cloud Peak offers a product that is at least marginally more acceptable to the eco-freaks than the mostly Eastern U.S.-mind bituminous (“soft coal”). That’s the kind of coal whose increased use could allegedly warm our atmosphere to Venusian temperatures within days. At any rate, CLD seems to be recovering as well, although its low-low price is making it look right now rather suspiciously like a penny stock.

Nonetheless, there are opportunities here for the patient speculator. Ditto for firms like Newmont Mining (NEM), a low-cost miner of gold, silver and other metal commodities, and maybe even beleaguered gold and copper miner Freeport-McMoran (FCX), which may “unlock shareholder value” as well by spinning off its ill-advised, relatively recent purchase of oil and gas assets.

None of these ideas, except maybe FNFG, are worth panic-buying right now. And Obama and his EPA thugs still have a little over a year to complete their openly vowed destruction of America’s coal industry. Nevertheless, the winds do eventually change, even after America’s long Obamanation nightmare. And hopefully, our money can still be profitably invested somewhere besides the huge maw of our Way Too Big Federal government.

At least we hope so.

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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