Tuesday markets: Materials, builders go wild

Base metals, aluminum, all-important copper soar along with related mining stocks and builders as stocks seem to predict an all-out building boom dead ahead.

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Trucks hauling copper ore near Silver City, NM. (Photo via Freeport-McMoRan website)

WASHINGTON, January 24, 2017 – After wallowing in red ink this month, seemingly reluctant to establish new all-time highs, avidly followed Wall Street indexes like the Dow Jones Industrials (DJI), the broader-based Standard & Poor’s 500 index, and the tech-heavy NASDAQ find themselves pinned firmly in the green zone early Tuesday afternoon.

As we write this, the DJI is up 118 points at 19,918 (+0.59 percent), the S&P 500 is up 13.84 points, currently standing at 2,279.49 (+0.65 percent), and the NASDAQ is up a whopping 39 points at 5,591.97 (+0.72). It feels like the most bullish day thus far in 2017, though we’d have to check stats on that to make sure our crowd-counting ability is up to snuff. (Plus, things can still change as the afternoon progresses.)

The heroes behind today’s currently super-sized plus move are stocks of companies lumped together under the sector category known as “Materials,” which includes copper, base and construction metals and to some extent, energy. Any time traders and investors see big gains like today’s in this particular sector, they view it as a big plus vote for business in general, including positive things like increased employment, economic expansion, building… you name it. Unsurprising, homebuilder stocks ticked up nicely today as well.

The general logic is this: if houses office buildings and factories are getting built or renovated, Americans are going back to work, will rake in more money to buy more stuff, and, unsurprisingly, will pay more taxes to Federal, state and local governments. The latter might contribute a good deal to the difficult task of restoring or beginning to restore many government sectors to health and reduce deficits. Or so the reasoning goes.


Are today’s market gains being prodded by yesterday’s highly publicized meetings between President Trump and many of America’s most important big-company CEOs and union bigwigs? Perhaps.


Read also: Trading tools: Colorful stock market heat maps help traders


Objectively, markets have been running on air since the morning of November 9, 2016. Earnings are not increasing fast enough in many stock sectors to justify the kinds of numbers they’ve been piling up since that day. Yes, things see to be improving, but this much?

Even so, Trump seems to be delivering pronto on his key campaign promises and threats. His White House meetings yesterday sent a positive signal to markets. So, too is his initial attempt, announced just today, to begin reversing the disastrous, job-killing anti-Keystone, anti-Dakota Access pipeline rulings by the outgoing Obama administration.

This obviously planned follow up action has already begun to demonstrate to CEOs and union bosses alike that Donald Trump was dead serious about the issues he supported during his allegedly doomed Presidential campaign. By voting for Trump, Americans voted for more jobs and better salaries after years of economic suppression by an unfriendly White House. Trump is well aware of this. Now the unions and CEOs know it, too.

Seeing what appears to be considerable momentum before them, both these groups—traditional adversaries—will be increasingly motivated to jump on the Trump train together early and often, lest it depart the station before they can get on board. The market likes this—a lot—and hence the big market moves today.

While many sectors (think of the banks and financials post-November 8) have been rotating into the lead and have genuinely gotten ahead of themselves in the Maven’s opinion, the stock market has actually proved over many years, to be perhaps the most informed of economic indicators. If stocks in general make large, seemingly absurd moves up or down, they are, historically, giving us a glimpse into a future reality that will begin to occur roughly six to nine months in the future; although given today’s supercomputer trading geniuses, markets might now be predicting how things will unfold, say, 3-6 months hence.

At any rate, today’s markets, if this move can be sustained, are telling us that Happy Days Are Here Again or almost, even though a Republican is now in the White House. If Mr. Market isn’t having fun with us at our expense, this means that we might just begin to see a much brighter economy unfold beginning some time this year or next.

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