Here’s Why Basic Materials are Leading the Dow to 12,000

Markets sold off super hard this morning, dragging the Dow (NYSE:DIA) down to 12,000 for a nice test. Although media headlines are blaming the sell off on the extremely volatile weekly Initial Jobless Claims number, the real reason continues to be a fear of how rising Energy (NYSE:XLE) prices will inevitably harm the economy.

One of the key unknowns on Wall Street’s list is how tomorrow’s “Day of Rage” will unfold in Saudi Arabiathe linchpin for any chance of stability in Oil (NYSE:USO) markets. You’d have to have some steel nerves to be buying stocks for the short term ahead of an event which could cause another round of panic in the Middle East.

With the odds for Middle Eastern instability higher than the odds for a quick resolution, investors are continuing to hedge against the global economy slipping on Oil (NYSE:USO). We’re hearing some top firms are looking to either unload some exposure to the highly cyclical Basic Materials sector (NYSE:XLI) or put on some shorts as a hedge. Basic Materials have been on a monster run since March 2009, so taking some profits around yesterday’s two-year anniversary is not the worst idea in the world. (If you’re looking for the worst investment ideas, check out “Carl Icahn’s List of 7 Worst Investments“)

Here are some of the stocks getting especially hammered today:

Silver Wheaton Corp. (NYSE:SLW)
Cliffs Natural Resources Inc (NYSE:CLF)
Potash Corp./Saskatchewan (NYSE:POT)
The Mosaic Company (NYSE:MOS)
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)
Northern Dynasty Minerals Ltd. (AMEX:NAK)
China Agritech Inc. (NASDAQ:CAGC)
Silvercorp Metals Inc. (NYSE:SVM)
NovaGold Resources Inc. (AMEX:NG)

If you’re looking for a low risk way to invest in or trade Industrial and Capital Goods, take a look at Wall St. Cheat Sheet’s feature “Industrial and Capital Goods ETF: The Top Exchange Traded Fund for Your Investing Watchlist“.