NEWS OF THE WEEK
STOCK MARKET RALLY: Chemicals outperform top indicators Stock Exchange ComposIn the past few months, ite went up 1.9% to 98.72. while the Wall Street spotChemical stocks have risen faster than The New York Stock Exlight has been on the broad most indexes in past year change Industrials rose Dow Jones Industrial AvOct. 7, Oct. 8, only 1.3% to 115.04. The erage and the record highs 1983 1982 % change broad Standard & Poor's that it keeps setting, chemDow Jones Industrial Average 1272.15 986.85 28.9% 500 index increased 2.2% ical stocks have done even New York Stock Exchange 98.72 75.00 31.6 to 170.80, while the Stanbetter. In fact, C&EN's Composite dard & Poor's 400 IndustriNew York Stock Exchange 115.04 85.14 35.1 chemical stock index has Industrials als increased just 2.0% to vastly outperformed the American Stock Exchange Index 232.27 149.57 55.3 192.36. Dow Jones Industrial AvOver the Counter Composite 297.36 198.89 49.5 erage over the past year. It If security analysts are Over the Counter Industrials 353.47 226.01 56.4 means that Wall Street correct in their standard Standard & Poor's 500 170.80 131.05 30.3 rates chemical earnings thesis that the stock marStandard & Poor's 400 Industrials 192.36 146.21 31.6 very high for 1984. ket predicts earnings about C&EN Chemical Stock Index3 191 295 54.5 six months in advance, the In the past three months, a C&EN index based on stock prices for Allied Corp., American Cyanamid, Celanese, runup of the chemical stock chemical stocks as meaDow Chemical, W. R. Grace, Monsanto, and Union Carbide. index during the summer sured by C&EN's index bodes well for chemical have risen faster than any of the standard market indicators, Industrial Index shot up 56.4% to earnings in 1984. And Wall Street does seem to be banking on high more than doubling the pace of the 353.47. Dow Jones average. However, since early summer, chemical profits next year. For In spite of some relatively dire chemical stocks have outperformed example, Richard A. Derbes, chief predictions about an October correc- all the broader indexes. Security ana- chemical analyst for Oppenheimer tion in the stock market, recent lysts have talked about a "flight to & Co., a New York City investment events indicate that the climb will quality" over the summer to explain firm, says that several indicators of continue. The market seems to have the rapid rise in the Dow Jones overall economic activity "suggest gotten over much of the volatility average. In the three months end- an environment in which the dethat characterized it just a few ing Oct. 8, the Dow Jones Industri- mand for chemicals rises substanmonths ago, when almost any kind als increased 5.4% to 1272.25 to lead tially, enabling high enough overof economic news caused sharp ups all of the standard indexes. How- all sales and margins to produce or downs. Now the market just ig- ever, C&EN's chemical stock index robust profits." jumped 13.9% in that time. Some Oppenheimer thinks many cheminores bad news. Although growth in market in- stock indexes such as the Amex in- cal firms will have record gross mardexes, including C&EN's, has slowed dex and both of the OTC indexes gins in 1984. Some firms, Derbes since early summer (C&EN, July 18, actually have fallen in the past three says, are already exhibiting record results. Consequently, he adds, "we page 7) on an annual basis, most months. For instance, the American Stock believe the profit recovery of the indexes still are going strong. The chemical index is near the top of Exchange Index has fallen 5.5% to next year will continue to be very the pack. Between Oct. 8, 1982, and its present 232.27 from the first week robust even if the economic recovOct. 7, 1983, C&EN's index climbed of July. The Over the Counter Com- ery is somewhat disappointing." posite has dropped 7.0% to its curHow can chemical profits do so 54.5% to 295 (1954= 100). This performance was exceeded rent 297.36 from the first part of well in a tepid recovery? Because by only two of the broader market July. And the Over the Counter In- chemical firms' drastic efficiency averages—the American Stock Ex- dustrial index has fallen more than moves of recent years allow good change Index and the Over the 10%—10.7% to be exact—since July profitability at lower rates of plant capacity use. This realization has Counter Industrial Index. The Amer- to 353.47. The rest of the indexes rose, but seeped through Wall Street analyican Stock Exchange Index increased 55.3% to 232.27 during the same their increase was not even enough ses and is a large factor in the recent period, and the Over the Counter to match the DJI. The New York bid-up of chemical stock prices. D 6
October 17, 1983 C&EN
