Why Is This Obscure Corner of the Stock Market Exploding Higher?

Wall Street had a positive day on Wednesday, as stocks generally recovered from a slow start to post solid gains. The Nasdaq Composite (^IXIC -0.52%) and S&P 500 (^GSPC -0.22%) slightly outperformed the Dow Jones Industrial Average (^DJI 0.06%), but all three benchmarks were significantly higher on the day.

Data source: Yahoo! Finance.

It's been interesting to see how various sectors of the market have rotated in and out of favor as the bull market evolves. Today, there was a lot of action in uranium stocks, as a trend that started a while ago is gaining a lot of momentum.

Big gains for uranium stocks

Among the biggest gainers of the day were companies in the uranium business. They include the following:

• Uranium Royalty (UROY -0.43%) picked up more than 25%, hitting an all-time high since its April 2021 listing on the Nasdaq and its Canadian IPO in late 2019.
• Uranium Energy (UEC -0.73%) climbed 14% to reach levels not seen since 2012.
• Energy Fuels (UUUU 1.56%) was higher by 11%, also hitting nearly a nine-year high.
• Denison Mines (DNN -0.49%) also picked up 11%, with the stock more than doubling in the past year.
• The much larger Cameco (CCJ -0.50%) was up just 2% on the day. Nevertheless, it too is near its best levels since the early 2010s.

So what's happening to justify these moves? The answer has to do with the uranium market itself.

Image source: Getty Images.

Uranium prices have skyrocketed recently. The Sprott Physical Uranium Trust (SRUU.F 0.83%) picked up almost 4% today and is up sharply from its July IPO. The fact that the ETF exists is a factor in the market, as uranium that the fund holds means supply taken off the market for users of the radioactive element.

"Clean" energy

The big question in the energy industry has been whether plans to shutter nuclear power plants will go forward. On the one hand, the dangers of such plants are well-known, with the Fukushima Daiichi disaster in 2011 prompting many countries around the world that had historically relied on nuclear power to make plans to transition away from uranium. Roughly half of nuclear power plants in the U.S. are scheduled to close in the next decade.

However, ambitious goals to reduce carbon emissions could lead to a change of heart regarding nuclear power. By carbon-centered definitions, nuclear energy is "clean," despite the challenges of disposing of waste material and preventing catastrophic plant failures. Moreover, unlike renewables like wind and solar, nuclear power is available on demand and regardless of weather conditions.

Indeed, even Japan itself is considering restarting the nuclear reactors it shut down in the wake of Fukushima Daiichi.

Uranium meme?

Lastly, individual investors like the ones on Reddit's WallStreetBets forum have become interested in the uranium story. That's increasing volatility in the stocks involved, and it reflects overall investor appetite for companies that can produce lasting growth.

Combine all these factors, and you get a compelling story for a commodity market that has long been shunned by most investors. With many people looking for the next big move in the markets, such stories are reason enough to pay attention to the uranium market for the rest of 2021 and potentially beyond.