Stocks took a breather yesterday following Tuesday’s big gain. The Dow traded with light volume in a mere 35-point range for the entire session. 

Daily Stock Market News

Dow: +2 points at 12,042
S&P 500: -4 points at 1,304
Nasdaq: -2 points at 2,750

Volume and Breadth

NYSE: 935 million shares; decliners ahead 1.2-to-1
Nasdaq: 514 million shares; decliners ahead 1.3-to-1

Futures and Related ETFs

March Crude Oil: +9 cents per barrel at $90.86; Energy Select Sector SPDR (NYSE: XLE) -6 cents at $74.28
April Gold: -$8.20 per ounce at $1,332.10; PHLX Gold/Silver Sector Index (NASDAQ: XAU) -2.25 points at 204.04

What the Markets Are Saying

The stock market took a breather yesterday, but instead of resting following the new 30-month high on Tuesday, investors appeared confused and stayed away as better earnings and higher employment numbers contrasted with the scenes of Cairo burning. The Dow managed to inch ahead, but the S&P 500 fell 4 points — admittedly an insignificant figure. However, what is interesting about the S&P 500’s performance is that every sector except one showed a loss, led by the financials, which were off 0.9%. Technology was the only winner, up 0.3%.

But while stocks napped, the opposite was the case in the futures pits in New York, and even in Chicago, despite a delayed opening due to a record blizzard in the Midwest. And the reason for the activity is that inflation is beginning to take a toll with rising prices in major commodities.

Copper hit new highs for the second straight day, along with nickel, which reached its highest price since May 2008, and the same was true of aluminum. Agricultural commodities are seeing unusual demand with sugar prices hitting the highest level in more than 30 years at 35.31 cents a pound. And on Tuesday, soybean futures rose nearly 2%, their highest level since July 2008, and rose again yesterday.

What is causing the run on commodities? The Wall Street Journal’s Matt Whittaker says that it is the global recovery in manufacturing that’s responsible. Both the United States and China saw high levels of manufacturing in January, and the euro zone’s manufacturing jumped to a new nine-month high. And companies are now stockpiling materials in advance of inflation expectations, which drives prices even higher (The Wall Street Journal).

Investors can act now to not only hedge against future inflation expectations, but also focus their investment dollars in stocks, ETFs and futures that should rise in value as prices are bid higher on the world’s futures markets. I’ve highlighted stocks like Freeport-McMoRan Copper & Gold (NYSE: FCX) — 2\1 split today — and Cliff’s Natural Resources (NYSE: CLF), and they’ve done well. And along with them are a host of exchange traded funds like First Trust Materials AlphaDEX (NYSE: FXZ), PowerShares DB Commodity Index Fund (NYSE: DBC), PowerShares DB Agricultural Fund (NYSE: DBA), and others. (For my favorite, see the Trade of the Day.)

The range of possible investments is huge, and investors should explore and develop strategies to take advantage of the possibilities. But don’t just take my word or anyone else’s. Get involved and research your own ideas through the many resources offered on the Internet and your broker. There is just no substitute for studying the possible investment opportunities than your own labor; so dig in now and get ahead of the inflation curve.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.