Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of coal miner Arch Coal Inc jumped as much as 11% this morning as energy stocks shot higher.
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So what: Energy is suddenly on a hot streak and it's dragging coal stocks with it. As of noon EDT, the price of oil had jumped 1.7% to $53.02 per barrel and natural gas was up 1.5% to $2.69 per MMBtu. It's really natural gas that's the biggest competitor to coal in the U.S., and when natural gas rises, it raises the potential price electricity producers will pay for coal.
Now what: The rise in energy prices may be good today, but there's nothing changing the fundamental problems facing the coal industry. Just look at how much lower natural gas is today than its two-year average, and at the money Arch Coal lost over those two years.
There's just no reason to think demand for coal will rise significantly over the next decade. Competing energy sources are simply too cheap and even countries that once invested in coal, like China and India, are backing away from the energy source, leaving miners with hundreds of millions in losses that show few signs of stopping.
The article Why Arch Coal Inc's Stock Popped 11% Today originally appeared on Fool.com.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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