It will be interesting to see how markets react to the European GDP news this morning, but as we look we see US futures higher. We will have our own economic news out this morning, so that could take markets either way depending upon the severity of it. We are in that area now where even bad news may be good news as it would force the European central bankers and the US Fed to play their hands, which is what the market truly wants. These are all situations to be aware of this morning, especially for those investing in the commodity space.
Oil & Natural Gas
The entire oil and natural gas sector got hit yesterday, and hit pretty hard after the great rally we had over the past couple of weeks. None were hit harder than Quicksilver Resources (KWK) which saw shares fall by $0.49 (10.70%) to close at $4.09/share as the natural gas producer pulled back on volume of 9 million shares. There was no news here, other than the fact that the company was one of the largest percentage losers yesterday.
SandRidge Energy (SD) also was hit hard yesterday on strong volume of 17.2 million shares. Shares fell $0.38 (5.56%) to close at $6.45/share which for us is in 'no man's land' right now. Just a little too high to pull the trigger but a little too low to see the momentum carry it forward. If shares fall down to the $6-6.10/share level we will be buyers and should they move higher from their recent pullback then we would think that the momentum trade is back on. Remember, there will be a JV announced in the Mississippian play at some point in the near future and that will most certainly force investors to reevaluate the multiple they are using as a valuation metric for SandRidge.
Steel
Another name we saw giving back recent gains was AK Steel (AKS) which saw shares fall $0.31 (5.22%) to close at $5.63/share on volume of 5.4 million shares. The stock has been volatile, but so to have their peers. It is as yet hard to tell whether their recent price increase was a one off event or the beginning to a story where the company and other in the industry are able to pass along costs and price increases to their customers. Obviously that would be uber bullish, so we will continue to watch and see if that is indeed the case here. Until that is confirmed, we are merely spectators here.
Copper
It is looking like there will be a perfect storm here for Freeport-McMoRan (FCX) in the coming months. They have large exposure to both copper and gold and those two commodities appear as though they could put together some runs should the Europeans act and world GDP growth ticks higher. Europe's GDP numbers this morning were not altogether good, but then again they were not nearly as bad as they could have been and Germany and France appear to still be whole. Shares did fall below the $36/share level, and if they fall below the $35 level we would begin to worry about the recent rally. In Monday's session shares finished lower by $0.83 (2.29%) to close at $35.48/share on volume of 15.2 million shares.
Refining
Shares in Tesoro (TSO) rose $3.37 (9.49%) to close at $38.87/share after the company announced that it had agreed to buy BP's Carson refinery. The deal makes Tesoro one of the largest refiners in the western United States and one which will produce about 25% of California's overall production. The company has built up scale in the region, so this $1billion plus acquisition will most surely come under some scrutiny but should still pass. Refiners have been one of the hot sectors this year, and Tesoro has been one of the better performers, having been highlighted here a few times.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
