Cat Stock Blog

Caterpillar leaped out of the gate and climbed all morning, but profit-takers took some of the glow off by the day’s end. Financial and tech shares had a nice outing, too. Good day to be bullish; we’ll see how long it lasts. Full quote at Yahoo Finance.

Indexes were all up: Dow, up 1.34%; Nasdaq, up 2.06%; S&P 500, up 1.64%. Wrap-up at Market Watch.

Caterpillar has had two green days in a row on above-average volume, though both days saw price seepage into the close. Check out Cat’s six-month chart at StockCharts.com and pay heed to today’s high, around $32 a share. Then look at the previous lows in October and November: also around $32. This is a classic bear market pattern: old “support” become new “resistance.” We need a strong surge above $32 to be confident that this rally has legs.

Martin T. Sosnoff at Forbes.com profiles cyclical stocks that tend to pop early in an economic rebound.

I am periodically intrigued by some viciously cyclical properties like U.S. Steel, Freeport-McMoran and Rio. We’re talking about steel, copper and iron ore. Worldwide industrial production governs the price cycle of these commodities. Fertilizer producers like Mosaic and Potash are tied to agricultural cycles in corn, wheat and soybeans.

Freeport is almost a pure copper play with some byproduct gold. Less than a year ago, copper prices surged above $4 a pound. Today, copper trades around $1.50. Interestingly, Freeport earns a little money even at $1.50 a pound copper.

Sosnoff notes that Freeport topped $127 last year and now is in the $20s. U.S. Steel was at $196 last year and now is around $28. Could they rocket back up to those levels? Perhaps, but…

I had no idea that U.S. Steel peaked at $196 last summer when its earnings power was projected above $18 a share. No cyclical stock ever sells for long at 10 times projected peak earnings, but obviously, Wall Street didn’t see a deep recession about to unfold. It now trades around $28. If oil prices ever recover, its tubular steel division again will earn serious money, but worldwide steel production is likely to fall 10% this year and then recover slowly.

Overall a nice read, with cool anecdotes about his mom’s moldy General Motors certificates.

This slather-on-the-cheese video appears to be an ad appearing in the Australian reality TV show “Jack of All Trades,” of which Caterpillar is one of the sponsors.

More on the show, if you’re curious

The same site whose “Caps” program called Caterpillar a screaming buy at $46 in December now has a Fool surveying the carnage of January in heavy machinery stocks and concluding: 2010 is looking good.

Yes, Fools, the cat is now fully out of the bag. Global industry simply fell off a cliff sometime last fall, and the more plant closures and layoffs we see, the more this once-bagged cat resembles a rabid, ferocious lion

Actually the post does mention most of the regulars — Terex, CNH and company — and notes that Deere’s earnings later this month are the numbers to watch.

Milwaukee Journal Sentinel finds a young Indian graduate-to-be who received a job offer in the middle of last year that suddenly went away in December.

Naveen Duraisamy’s future seemed enviable: Despite a down economy, the engineering student had a job offer from a Fortune 500 company, where he’d start after graduating from the University of Wisconsin-Madison.

Then, days before his Dec. 21 commencement, the international student got an e-mail from his future employer: Caterpillar Inc. had rescinded the job offer, citing uncertain economic times.

With his student visa about to expire, Duraisamy quickly enrolled in classes so he could stay in the country. He began the job search from scratch.

“I was completely shocked,” said Duraisamy, 26, a native of southern India. “I didn’t know what to say to them.”

Duraisamy is among dozens of mostly engineering and business students in Wisconsin who have had job or internship offers rescinded because of the economy.

Lot of this happening these days, I suspect.

Not a huge surprise: Factory orders dipped 3.9 percent in December, according to the Commerce Department. Associated Press reports:

Analysts are forecasting that manufacturers will continue to face hard times in the coming year because of a deepening U.S. recession and weakness this has spread worldwide, cutting sharply into demand for U.S. exports.

For December, demand for durable goods, products expected to last at least three years, fell by 3 percent, even worse than the 2.6 percent drop that the goverment initially reported last week.

Demand for non-durable goods, products such as food, paper and petroleum, fell by 4.8 percent in December following an 8.7 percent fall in November. Some of this decline reflects the big drop in energy prices that has occurred in recent months.

Be glad you’re not Boeing: Demand for commercial aircraft fell by 43.8 percentt.

Full report at the Census Bureau.

Finally, a burst into the green: Caterpillar popped at the open and climbed all morning, then proceeded to give back half of its gains in the afternoon as earning worries on the broader markets cut the wind from everybody’s wings. Full quote at Yahoo Finance.

Indexes finished in the red zone: Dow, down 1.51%; Nasdaq, down 0.08%; S&P 500, down 0.75%. Wrap-up at Market Watch.

Trading volume in Cat shares remains about 40 percent above average, which normally would be a happy outcome on an up day. If you check the candlestick patterns on Cat, though, you see one of those inverted hammers that tends to predict more travels to the downside. I suspect once earnings season subsides and the river of bad news fades from the headlines, we might finally see a bit of a rally (barring further bank meltdowns, of course).

National Public Radio tracks the effects of the Mossville, Illinois, layoffs from the factory floor to suppliers to a local restaurant and finally all the way to Las Vegas, where a laid-off Peorian was planning to attend a billiards tournament but might not now, for obvious reasons.

Tammie Cox of nearby Peoria just lost two jobs, which she says earned her about $30,000 a year — neither of them at Caterpillar, but both of them indirectly dependent on the company.

At one job she tracked Caterpillar parts.

“I was employed just recently through DHL Global Forwarding, but because of Caterpillar, they had to lay off employees,” she says.

Cox also waited tables at a Mossville restaurant and bar that depended on Caterpillar workers — a place called Building G.

“The Caterpillar workers use to, if they wanted to go have a beer or a get-together with their friends, they would say that there was a meeting at Building G,” she says.

Cox says that after a promising start last summer, the restaurant found that Caterpillar workers were cutting back, and business at Building G slowed to a halt.

Seems Cox is an ace eight-ball player who was planning to compete in Vegas but might have to pass on it this year.

Audio of this piece will be available around 7 p.m. EST. This is the kind of piece that NPR excels at.

(Incidentally: this link was sent along by a Cat Stock Blog reader — I won’t name names, but I wanted to say thanks and encourage everybody to send your tips along.)

The BBC wades into the debate over “Buy America” provisions in the U.S. economic-stimulus legislation. This is my favorite quote on the issue to date:

Protectionism is the crack cocaine of economics. It provides an immediate high that leads to economic death. — Richard Fisher, Dallas Federal Reserve president

Interesting link: “Reckless stupidity of Buy American.”

One of the regulars at Heavy Equipment Forums stopped in on the Milton Caterpillar dealership and grabbed a bunch of pictures of Caterpillar machines. Here’s a spanking new dozer:

The thread also has interesting details about Cat’s dealership operations, including which are the biggest, and a bio of the Holt dealership in San Antonio, Texas. All must reading for tractor geeks.