As Economy Zooms, Some Investors Seek ‘Cyclicals’

It’s the nature of a bull market that, even in the face of bad news, many investors aggressively search for the silver lining.

Last week, as long-term Treasury bond yields rose amid a barrage of data pointing to a robust U.S. economy, Wall Street’s optimists were snapping up stocks of companies that may have more to gain from economic strength than they might lose because of higher interest rates. At the top of the list: so-called cyclical stocks, industrial companies whose fortunes are closely tied to the economy’s boom and bust swings.

On Friday, for example, while the broad market was sharply lower, aluminum giant Alcoa rose $2.81 to $89.50, oil titan Exxon gained $1.75 to $71.69 and machinery maker Caterpillar jumped $2.13 to $46.25. Gains in those stocks--all members of the 30-stock Dow Jones industrial average--left the Dow off just fractionally on Friday, while the broader Standard & Poor’s 500 index fell 0.7%.

Whether the rush into cyclicals has any legs is the question. A Morgan Stanley index of 30 major industrial shares reached its all-time high April 21, at 570.23, then dove 31% from that peak to its October low, as investors feared global economic bust.

So far this year the index, at 484.11 on Friday, is up 1.5%. That’s about twice the gain of the S&P; 500.

On Friday investors gave a decent, if not overwhelming, reception to a new cyclical: Delphi Automotive, the auto parts giant spun off by General Motors. The stock, issued at $17 a share, rose 8.5% to close at $18.44 on the New York Stock Exchange.

Silly GM. It should have put a “.com” after the name.