Shares of Pacific Ethanol (NASDAQ: PEIX) rocketed higher when the market opened on Aug. 27, surging more than 24% in the first half hour of trading. At this writing around 12:13 p.m. EDT, shares have cooled off but are still up more than 9%.
This is a reversal for the company’s stock price over the past week; even with today’s gains, shares are down 28% since Aug. 18. But it’s a return to the huge upward trajectory over the duration of the coronavirus crisis. Shares are up 462% since the beginning of 2020, as investors have chased gains in any stock that looks likely to benefit from the pandemic.
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For Pacific Ethanol, that’s the huge growth in demand for high-quality alcohol for cleaning and sanitation supplies. Pictures of empty store shelves in the cleaning aisle over the past few months are a visceral reminder that consumers and healthcare professionals have scrambled to get adequate supplies of these products.
Today’s gains seem to be the same thing that has some other stocks moving higher today: The Fed’s approval of a strategy that will likely keep interest rates low for some time to come, and the fact that the central bank’s putting less emphasis on keeping inflation in check.
Additionally, the news that Abbott Labs (NYSE: ABT) has been given emergency use authorization for a COVID-19 test that costs $5 and delivers a result in 15 minutes is likely having some impact, too.
The idea here is that the Fed’s actions will keep interest rates low, which is great for consumers and businesses but not great for bond investors. On paper, this will keep more investors in stocks.
And the Abbott test could allow more parts of the economy and more businesses to open up to larger groups of people. More people interacting would likely increase the demand for cleaning and sanitation supplies in public places and businesses, as well as potentially boost the demand for ethanol as a fuel as transportation increases.
At least that’s the basic idea. Put it all together, and that’s a whole lot of speculation on what could happen, without much measurable predictability. Whether it’s really going to help drive Pacific Ethanol’s bottom line remains to be seen. Either way, investors should count on the stock remaining very volatile for months to come.
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