Falling Commodities Mean Good Things for Consumers

Markets were down across the board in trading today, despite a slightly higher than average volume. The NASDAQ was hit hardest in the selloff, plunging 142.53 points to close at 4,543.97. The Dow lost 312.78 points, and closed out the trading day at 16,001.89. The S&P 500 was down as well, losing 49.57 points to close out the day at 1,881.77.

Falling Commodities are Great for Consumers

It’s no secret that the commodities market has been hit hard lately. However, falling commodities prices are a big boon for consumers. As the price of precious metals and food staples fall, the price at stores for consumer electronics, household goods, and groceries are dropping.
Coupled with a deflating dollar, that means that consumers are getting more for their money than they have for a long time.

Of course, falling commodities prices are a double-edged sword. They are hurting companies like Mallinckrodt PLC (MNK) and Freeport-McMoRan (FCX), which both rely on the price of precious metals in order to turn a buck. Low commodities prices are also affecting everything from scrap prices to the cost of industrial feedstock, so they touch a lot of big manufacturers.

On the whole, low commodities prices are good for consumers. They keep costs down, which helps to lower prices. Still, everyone from electronics manufacturers to heavy equipment firms are impacted by the lowered prices, to say nothing of farmers who are currently harvesting their fields.

Bond Yields Drop as Gold Levels Off

The yield of 10-year bonds fell today as gold prices stayed even. Consumers are getting weary of the Fed’s continued inaction, and beginning to pull their money out of bonds, which are a direct reflection of the stability of the US dollar. The yield on 10-year Treasury bills fell 0.07% today, while gold was essentially flat.

Utilities Rise Despite Falling Natural Gas

The Utilities sector is up 0.58% over 3 months, leading the major indices in gains. The closest competitor, the Consumer Non-Durables sector, was up 0.52% over the same period. Every other sector is in the red.

The Utilities sector has been rising despite falling natural gas prices, and a leveling-off of the cost of coal and oil. It’s leading the market in gains, as the Health Services sector takes a major dive thanks to underperforming biotech companies.

The sector is rising in profitability despite the fact that this is an off-peak time of year. It’s expected to continue rising over the winter, when more consumers use heating oil and natural gas in order to keep warm.
Published on Sep 28, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2016. Content published with author's permission.

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