Trader Talk

Is the IEA Front-Running the IMF?

European debt issues haven't gone away, but they can be ignored — for a day or two. Here's something odd: S&P Industrials up almost 2 percent, and S&P Materials up 1.6 percent, but S&P Energy up less than 0.5 percent.

Huh? Normally, energy stocks will trade in tandem with industrials and materials, but that's not happening today.

The likely reason: the International Energy Agency (IEA) has revised downward its estimate for global oil demand in 2011 and 2012. This is not that surprising — energy is a proxy for global growth. The Federal Reservecut its GDP estimates a short while ago, and many are expecting the IMF to cut its GDP estimates soon as well.

So, if you want to be cynical about this (not me!), the IEA is front-running the IMF.

And while most energy companies are optimistic long term, there's plenty of room for short-term uncertainty.

We saw that at the analyst meeting that truck engine giant Cummins held this morning. It was mostly good news: they raised their growth targets for the next few years. They now expect sales of $30 billion by 2015; previous targets were $20 billion by 2014.

$30 billion is roughly double the revenues of 2011, so we are talking about growth of about 14 percent a year. That is substantial.

(Get another perspective from "Fast Money": Caution: Industrials May Be Deceiving.)

However, they noted slower sales growth recently in China and India, which they are watching carefully. That's important, because sales outside the U.S. are about 60 percent of total sales.

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