If you still believe that speculators cannot really drive markets up too far in any direction, take a look at the commodities market. The continuous raising of margins in silver has taken out all of the gas from the silver market. The rising dollar today is helping. The question now is how many more margin requirements will be hiked in commodity futures. Forget that a moment. If you are an operating company that your greatest variable cost is a commodity or energy, today is a great day. There are some obvious airline winners, but we have highlighted a few other winners who may be rejoicing today’s drop in oil and commodities after the metals sell-off this week.
Oil has fallen under $100 suddenly. Silver has crashed, and gold is selling off. Other commodities remain soft as well. If you are a commodities trader, you have to just assume that higher margin requirements are headed your way whether you think that is fair or not.
AMR Corporation (NYSE: AMR) is the parent of America Airlines and its shares are screaming today. Shares were up 7% at $6.59 on more than 22 million shares.
Carnival Corporation (NYSE: CCL) may be a floating hotel, but it has significant exposure to high oil prices. You think it is cheap powering portable islands with gas that transport thousands of tourists at a time? Shares are up 5% at $40.82 on the day.
Eastman Kodak Co. (NYSE: EK) is only up 0.7% because the company is so troubled whether silver prices are high or low. Still, this former DJIA component is up 0.7% at $2.83 when the DJIA is down over 1.25%.
FedEx Corporation (NYSE: FDX) is seeing a gain of almost 3% at $95.37 on almost 3 million shares today. It flies parcels and packages rather than passengers, but the same issue is here as in airlines when it comes to energy prices and jet fuel.
Six Flags Entertainment Corp. (NYSE: SIX) may just be up because it split its stock and raised its dividend, but what about a huge drop in the price of gasoline. It’s about to be cheaper for the family to drive 50 miles to get to the theme park. Telling the kids that you can’t afford the gas just got a bit harder. Six Flags shares are up 1.7% at $73.50 late Thursday.
Tiffany & Co. (NYSE: TIF) is up due to the drop in gold prices. After all, it’s hard to sell jewelry at 100% or more than your peers using poor metals… Shares are up 1.3% at $68.28 on the day. This one held up better than we would have expected considering the cost of its commodity inputs.
United Continental Holdings, Inc. (NYSE: UAL) is up 7.5% at $26.22 on nearly 12 million shares. US Airways Group, Inc. (NYSE: LCC) is up 8% at $10.05 on more than 10 million shares and this is the first time above $10 since mid-February.
Winnebago Industries Inc. (NYSE: WGO) may not be one you would think of at first and it is one of the very economically sensitive companies. If the economy softens, the price of gas won’t matter as much, but if you have to pay close to $5.00 a gallon for a cross-country gas guzzling machine like an RV, any big drop in the price of oil is a welcome wagon for this company. Winnebago shares are up only 0.7% at $11.80 on the day, but volume is thin at 150,000 shares or so.
When it comes to taking the air out of hot commodities, the old saying is that nothing will kill demand like high prices. When silver was approaching $50 and when West Texas Crude was at $110 per barrel, it was a demand killer. Throw in a rising dollar and these commodities just lost one more fundamental support. That was then, this is today.
JON C. OGG