This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Commodities Stocks Get Creamed

NEW YORK (TheStreet) -- Commodities-linked equities were in the red across the board Tuesday as investors sold cyclical names that had rocketed higher since the middle of last year -- many having doubled in value.

The selloff touched the shares of nearly every company that plays in natural resources, from steelmakers to miners of industrial metals to chemicals producers to agricultural companies to the shipping concerns that transport those raw materials across the oceans.

The plunge in cyclical names followed a severe decline in the broader equities market Thursday, with the Dow Jones Industrial Average posting triple-digit losses as investors reacted to the prospect of a continually destabilizing Middle East and what that would do to oil prices.

Commodities futures led the charge into the red. The front-month copper contract was tumbling nearly 17 cents to $4.32 a pound on the Globex division of the CME, down from a record high of $4.66, set just on Feb. 15.

Agricultural commodities, meanwhile, were also falling. In Chicago trading, the May corn futures contract was declining 30 cents to below $7 a bushel, extending the losses from the previous session.

The reasons for the declines were several-fold. For one, many traders feel the run-up in commodities prices has created a priced-to-perfection environment in basic materials stocks.

"The equities that are sensitive to commodities can't run without the underlying," said Torsten Sippel, a trader at UBS (UBS). But, he said, "I think there are people ready to buy on the dips ... if things get back to normal."

Then, of course, the contagious Middle Eastern political upheaval reached the first major oil producing nation in Libya this weekend, driving crude prices higher.

Energy prices are intertwined with food prices, and inflation in both areas has raised the global specter of central banks around the world instituting inflation curbs on their economies, which would curtail growth. That's already been the case in China, where authorizes have made a series of growth-slowing moves for fear of asset bubbles and inflation.

"It's almost as if some are beginning to question, in these commodity areas, how much better it can get, especially if you start to see these governments trying to rein in inflation," said Anthony Rizzuto, an equities analyst specializing in metals at Dahlman Rose, an investment firm in New York.

There is no bigger central-bank prop than the U.S. Federal Reserve. The greatest uncertainty -- and the most potent fear -- remains the Fed's zero-interest rate policy and quantitative-easing programs, and what happens to the economy, and commodities markets, once that rug is pulled out from underneath.

Just last week, for example, the president of the Kansas City Federal Reserve Bank, Thomas Hoenig, warned of a potential asset bubble in U.S. farmland values and commodities in general, and said that any increase in interest rates could end up bursting that bubble and slashing farmland prices by as much as a third.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASDAQ 4,538.5510 +6.4470 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs