What's Behind Vulcan's Climb

Even the slightest piece of positive economic news can send a cyclical stock rallying. Take, for instance, Vulcan Materials (VMC Quote), a heavily shorted construction materials company that is surging today on the latest economic data from the Conference Board.

Vulcan shares rose 8.4% to $84 in recent afternoon trading Monday. The stock has fallen from a 52-week high of $122.47 last summer, but has been a strong performer of late.

It helps that Vulcan is a cyclical stock -- meaning it is in the camp that rallies about six to nine months ahead of a rebound in the economy. So if you believe the news that the economy is really going to improve by the end of the year, this latest rally in Vulcan's stock makes sense.

Tough Construction Market

On Monday, the Conference Board said its index of leading economic indicators rose by 0.1% in April, similar to the rise in March. Investors cheered the news as a sign the economy wasn't as bad as many feared.

Nonetheless, the current outlook for Vulcan's business lines look iffy. The bulk of Vulcan's revenue comes from the sale of construction aggregates -- which include crushed stone, sand and gravel, rock asphalt and recycled concrete -- used in construction of homes, buildings and infrastructure projects.

"There is a tough construction economy, the housing market is searching for a bottom, and commercial [construction] is slowing somewhat," says Jack Kasprzak, an analyst at BB&T, who rates the stock neutral.