Following a week that saw the Dow Jones Industrial Average (Dow Jones Indices:.DJI) gain 275 points despite horrendous economic data, the index closed out Friday unchanged from the day before. The biggest loser on the day, however, was aluminum producer Alcoa Inc (NYSE:AA)‘s stock, which pulled back 1.2%, putting it within striking distance of its 52-week lows again.
Although I’ve been (incorrectly) calling a top for a while now, perhaps it was the lack of consumer confidence as measured by the University of Michigan’s survey that finally did in the index’s inexorable climb. The survey plunged to 72.3 from 78.6, the lowest level in nine months, and said to be the biggest miss to expectations in the survey’s history. Of course, retail sales for March also fell, adding to the drumbeat of negativity we’ve seen, which is why the stock market’s continued rise is so incongruous. Apparently the Federal Reserve’s pumping of tens of billions of dollars into the economy, along with Japan’s recent opening of the floodgates, is all that’s necessary to artificially levitate the markets.
I maintain it’s all going to end badly, and sooner rather than later. In the meantime, commodities are getting crushed, and gold has officially reached bear-market territory, but Alcoa Inc (NYSE:AA)’s own earnings — and not just macroeconomic issues — have played a role in its performance since they were released. It may have beaten estimates for profits, but revenues came in weak and guidance seemed a head-scratcher, leading analysts to question whether the aluminum producer wasn’t wearing rose-colored glasses.
Commodities crushed
Since Alcoa’s unofficial kickoff to the earnings seasons, its stock is down 2%. Yet year to date it’s off 5%, a wide divergence from the overall performance of the Dow, which is up 13%, and that’s just a torrid pace that can’t be maintained.
As I mentioned before, though, gold is now in bear territory, having fallen 21% from its peak. It fell more than $63 an ounce on Friday, or more than 4%, to close trading at just over $1,500 an ounce (intraday it was as low as $1,480 an ounce). That’s a level it hasn’t seen since July 2011, as traders seek better returns elsewhere.
The consequence, however, is that precious-metals miners and streamers are being taken down, too. The world’s largest gold miner, Barrick Gold Corporation (USA) (NYSE:ABX) tumbled 9% yesterday, but it has the added problem of having its huge Pascua-Lama project in Chile being placed on hold as it looks at delays measured in months (at least) before it’s able to start up again.
The worst performer in the sector was NovaGold Resources Inc. (USA) (NYSEMKT:NG), which fell 13% yesterday as it scrambles to make sense of its Donlin Gold project in Alaska, the biggest known undeveloped gold deposit anywhere. The joint venture with Barrick Gold Corporation (USA) (NYSE:ABX) has essentially been in limbo since NovaGold Resources Inc. (USA) (NYSEMKT:NG)’s partner said last year it no longer made economic sense to pursue it.
About the only positive thing the miner can hang its hat on is despite the rising costs associated with the project and the falling price of gold is that Barrick Gold Corporation (USA) (NYSE:ABX)’s woes at Pascua-Lama might encourage them to return. It’s a slim hope to be sure, and that’s probably why the stock tumbled so hard. NovaGold Resources Inc. (USA) (NYSEMKT:NG) is running out of places to turn to.
