The commodity secular bull trend has tanked into a cyclical bear market as money flows into the strengthening dollar. And it’s taken down commodity stocks. Hardest hit are oil related shares, particularly drillers. Brazilian oil producer Petroleo Brasileiro (NYSE: PBR) has plunged 45 percent from its $77 high earlier this year to $43 Thursday, after hitting a 52-week low of $36 Wednesday afternoon. Similarly U.S. drillers have been hit from their highs: Baker Hughes (NYSE: BHI) is down 35 percent; Schlumberger (NYSE: SLB) has fallen 25 percent and transporter Transocean (NYSE: RIG) is off 28 percent.
Farming and metal stocks haven’t escaped the carnage. Gold, after approaching $1,000 an ounce earlier this year has plunged to $754. Metals producers Freeport-McMoran and Southern Peru Copper (NYSE: PCU) each have lost about 50 percent of their respective values, despite Wednesday’s short-term spike in prices due to the strong Chilean earthquake. Canadian fertilizer producer Potash has plunged 37 percent from its $241 high. Corn seed producer Monsanto has struggled all year. Despite shares jumping Thursday after the company raised earning estimates, the stock remains 30 percent off its 52-week high.
Slowing economies throughout the world have suppressed commodity demand. China’s Shanghai exchange has experienced a precipitous decline from the 6,000 level throughout 2008, losing nearly two-thirds of its value on fears China will slip into recession. Similarly, the Hong Kong’s Hang Seng index closed at its lowest level since October 2007.
Some analysts predict the weakening U.S. economy and strengthening dollar gives the Federal Reserve Board room to lower rates by 25 basis points at its September 16th meeting. Such a move is debatable, considering the inflation hawks who have been advocating rate hikes. However, the recent collapse of Lehman Bros and fragile condition of Washington Mutual, as well as the 6.1 percent unemployment rate, may spur the cut.
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