CAT is making a big move here


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Caterpillar has been hammered over the last two weeks and yesterday's move down came on especially high volume. All in all, CAT ( quote ) corrected a full 10.6% from the April 29 high to yesterday. Now the stock is bouncing a bit but yesterday's action still raises questions about just how sustainable the markets think Asian growth really is. The Asia Pacific region now accounts for 24% of CAT's overall revenue stream, up from just 12% back in early 2006. In other words, if CAT is on the defensive, the root of the problem is China. Global traders are increasingly concerned about whether Chinese growth can continue in the face of Beijing's ongoing efforts to cool construction spending and speculation. There is a lot more the government can do to stop real estate development -- and obviously, fewer new building projects means less equipment for CAT to sell. Couple this morning's relatively tepid CAT bounce with a stronger lift for emerging markets and commodities, and the culprit is pretty clear here. The message also applies to coal, iron ore and steel names, all of which have prospered by feeding the Chinese construction boom. Steel prices sliced back down through the 50-day moving average this morning. Look to 90.80 for 200-day support.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks

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