Rare move in the materials sector
- US-China trade standoff draws in “rare earths”
- US seeking independence in these critical elements
- Successful tariff negotiations a risk to bullish momentum?
As of Tuesday, the materials sector was smack-dab in the middle of the S&P 500’s year-to-date rankings, down roughly 2.6%. But the sector’s metals and mining sub-group was up more than 6%, which at first glance would reasonably seem to be a function of the strong rallies in gold and silver.
While strength in precious metals has certainly been a major factor—gold is up more than 12% this year—a usually overlooked portion of the metals and mining group has recently become a focal point for many traders and investors.
On Monday, USA Rare Earth (USAR) celebrated its one-month anniversary as a public company with a 41.4% rally, following up with a nearly 28% intraday gain on Tuesday:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Meanwhile, MP Materials (MP) rallied 21.7% on Monday and tagged a one-year intraday high of $29.72 on Tuesday before reversing to close down for the day:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Both are American companies that compete in an industry long dominated by China—the mining and processing of “rare earths,” a group of 17 obscure elements, some of which (e.g., neodymium) are essential for modern electronics, including the production of the magnets used in computer hard drives and smartphones.
Both stocks rallied Monday after reports over the weekend that President Trump was planning to issue an executive order to stockpile metals found on the Pacific Ocean seabed, in an effort to offset China’s dominance of battery minerals and rare earth supply chains.1 Previously, China announced it would restrict export of rare earth elements in response to US tariffs on Chinese goods.
While USAR has more than doubled this month and MP is up more than 60% this year, their charts suggest volatility could cut both ways, especially given the unpredictably of the tariff situation. Both stocks lost momentum later Tuesday, and MP closed sharply lower.
In other words, if the recent rally in stocks like MP and USAR can be reasonably attributed to expectations for tighter supply of rare-earth elements (and, longer term, expectations for increased US production), it also stands to reason that reduced US-China trade tensions could remove some of their bullish tailwinds.
If the past 10 days have shown us anything, it’s that the tariff situation remains extremely fluid, and the prospect of negotiations could quickly alter the outlook for specific markets, especially in the near term.
Market Mover Update: Check out “Navigating the Shifting Landscape of Tariffs” for a collection of insights from Morgan Stanley & Co. and Morgan Stanley Wealth Management thought leaders on the evolving tariff situation.
Today’s numbers include (all times ET): mortgage applications (7 a.m.), retail sales (8:30 a.m.), industrial production (9:15 a.m.), business inventories (10 a.m.), NAHB Housing Market Index (10 a.m.), EIA Petroleum Status Report (10:30 a.m.).
Today’s earnings include: Abbott Labs (ABT), ASML (ASML), US Bancorp (USB), Alcoa (AA), Kinder Morgan (KMI).
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1 Financial Times. Donald Trump plans to stockpile deep-sea critical metals to counter China. 4/12/25.