Channel 19

Todd Dills

Newton’s laws of motion at work on NYSE?

| April 12, 2010

Every driver knows, at least intuitively, Newton’s third law of motion, right? Or is it the first? In any case, it typically runs something like “for every action there’s an equal and opposite reaction,” and is meant to describe momentum and the interaction of objects. The wheels and tires, propelled by the truck’s engine, give it momentum enough that the consistent resisting force of the pavement doesn’t slow the truck down. . . .

When I looked into a report Friday that gave a neat little packaged window into the mechanics of how survey data and hypothetical guesswork affect stock price, broadly, then checked out that stock today, I remembered the laws. Engine maker Cummins’ stock price, see, had seen good fortune Friday, April 9, when at around 4:40 ET, wrote Barron’s Tiernan Ray, it closed up a buck oh four, or 1.6 percent. A UBS Securities analyst had raised the firm’s rating of Cummins from “neutral” to ”buy” upon March truck sales results (up 35 percent in March) and findings of a survey UBS itself conducted. The results of the study are what might be most interesting. Here I’m quoting Ray quoting, in turn, the UBS analyst Henry Kirn: “Cummins was cited by 40% of truckers as the post-2010 engine that they were most likely to buy. Detroit Diesel, Volvo, Navistar and PACCAR engines were named by 26%, 14%, 11% and 10% of truckers, respectively.”

Is it that big of a surprise that long-haul companies would cite Cummins in such large percentages now that Caterpillar is out of the market? I’d guess not, given that some of the other manufacturers mentioned are relatively new in the long-haul powertrain market, but the traders on Wall Street clearly took something from it Friday. On the other hand, Kirn suggested broad predictions of 2010 heavy truck sales continuing to be on par with or slower than 2009.

Maybe that bit of news sunk in with traders today — as of about 4 p.m. ET Cummins’ shares had lost a buck oh three, almost all they’d gained Friday.

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