Metal tests its mettle

Two commodities often viewed as bellwethers of economic growth—oil and copper—have pulled back in recent weeks. Copper’s correction has been longer and deeper, but the market was also retreating from the all-time high it set in May:

Traders may have noticed the market recently reached a significant price point—a former resistance level that has shown signs of transitioning into potential support. In late 2023 and early 2024, September copper futures (HGU4) stalled out three different times after rallying to around 4.000 (dashed line). The market broke out above this resistance level in early March on its way to May’s record high, but not before pulling back to test the breakout level.

Copper’s sharp sell-off over the past two weeks dropped prices to 4.036 intraday on Thursday—their lowest point since the successful test of the breakout level in late March. Whether this approximate level can once again support prices will be of great interest to traders and investors active in copper-mining stocks like Southern Copper (SCCO) and Freeport McMoRan (FCX), both of which have seen their fortunes this year rise and fall with the price of the red metal:

While it can’t be stressed enough that so-called “commodity stocks” aren’t the same as the commodities they traffic in—that is, they don’t always move in lockstep with their underlying markets—the trajectories of the former are often correlated to significant, sustained moves in the latter.

In other words, traders and investors in mining stocks may be keeping close watch on copper’s price action in the coming days.

Today’s numbers include (all times ET): Personal Income and Spending (8:30 a.m.), PCE Price Index (8:30 a.m.), consumer sentiment (10 a.m.).

Today’s earnings include: Aon (AON), Bristol-Myers Squibb (BMY), Colgate Palmolive (CL).

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