Will the commodities rally last?

A trader observes stocks at the New York Stock Exchange

TEXT OF STORY

Scott Jagow: The aluminum company Alcoa is a fixture on Wall Street. It's a part of the Dow Jones 30. It's traditionally the first to report profits during earnings seasons. And this morning, it's probably going to be a big downer for the market. As you may know, Alcoa announced major job cuts yesterday -- about 13 percent of its workforce. It's a sign of two things: One, companies that have already made cuts, like Alcoa, may need to do more and dig deeper. And two, the commodities boom has officially busted. Here's our senior business correspondent Bob Moon.


Bob Moon: If commodity prices made a sound last year, this might have been it:

[Sound of balloon inflating and popping]

Lately, investors have been trying to re-inflate the balloon, and some commodity futures have actually been rising modestly. Still, at Schaeffer's Investment Research, analyst Ryan Detrick thinks this rally in some commodities won't last:

Ryan Detrick: We've noticed a little too much optimism still, even in the face of this huge, you know, sell off in the last few months.

Already there are growing worries that prices paid by factories are actually starting to deflate. And the global feed and fertilizer company Mosaic just warned that sales activity dropped sharply toward the end of last year, and it's cutting production to handle excess inventories.

While there's little sign of a turnaround in food or energy prices, though, Detrick thinks some commodities could get a lift from the new administration's stimulus plan to rebuild the nation's roads and bridges:

Detrick: There's always money that's going to go into commodities somewhere, and in our opinion, it's going to work its way into more of the infrastructure.

Schaeffer's Research expects demand could pick up soon for construction-related raw materials, including steel and lumber.

I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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