Shares of ethanol producers surged on Tuesday, as traders anticipated President Bush’s State of the Union Address in which he is expected to call for an increase in the federal mandate on the use of ethanol as a fuel alternative.
Shares of Pacific Ethanol (nasdaq: PEIX - news - people ) kited up nearly 10%, or $1.68, to $18.50. Xethanol Corporation (amex: XNL - news - people ) ballooned 17.8%, or 48 cents, to $3.18. Archer-Daniels-Midland (nyse: ADM - news - people ) climbed 3%, or 95 cents, to $32.77.
But AG Edwards strategist Al Goldman cautioned investors to keep in mind that the bio-fuels sector is a brand new industry involving many fresh-faced companies. “There is good reward,” Goldman said. “But there is also risk. People should be aware of that.”
In addition to ethanol producers, all kinds of alternative energy companies, from clean energy developers to solar power firms, seemed to benefit as traders looked forward to a Presidential address expected to emphasize ethanol, increased fuel efficiency, and a reduced dependence on foreign oil. (See: “ Leaders & Losers For Tuesday, Jan. 23.")
But Goldman said he doesn’t expect there to be any serious reaction tomorrow in the markets to Bush’s first State of the Union before a Democratic-controlled Congress.
“The speech has been widely publicized,” Goldman said. “We know what Bush will say. And the Democrats already said how they will respond. So the only different thing that will happen tonight is that Bush will get much less applause than when he gave the speech a year ago.”
What will continue to drive the markets, Goldman said, aren’t presidential addresses but the economy, which he argues remains in very good shape.
Goldman pointed out that 78% of the past 23 regular monthly economic reports showed improvement over the prior month’s readings. Consumer confidence is up, Goldman noted, and employment is strong. He also expects the building industry to pick up in the spring.
“That will be another plus,” he said.
The only subject the President could touch on that might shake the market, Goldman said, was Iran. “If he came out and really rattled the sabers with Iran then that would conjure up a spike in oil prices and that could hurt the market on a short term basis. My guess is that he won’t do that.”
After falling on Monday, the Dow Jones Industrial Average bounced back on Tuesday, climbing .5%, or 66.98 points, to 12,544.14. The Nasdaq also rose .5%, 12.96 points, to 2,444.03. The Standard & Poor’s 500 increased 1%, or 7.88, to 1,430.83.
Traders guessed that energy demand would increase as cold weather moved into the northeast. Shares of Exxon Mobil (nyse: XOM - news - people ) climbed 1.3%, or 96 cents, to $73.86. Chevron (nyse: CVX - news - people ) moved up 1.6%, or $1.11, to $72.33.
Other market movers included United parent UAL Corp. (nasdaq: UAUA - news - people ), which reported fourth-quarter revenue and profit below Wall Street forecasts. Shares of UAL Corp dropped 7.5%, or $3.63, to $45.12.
On the flip side, Texas Instruments (nyse: TXN - news - people ) announced a strong quarterly profit and was upgraded by several analysts. Shares climbed 4.8 percent, or $1.38, to $29.97.
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