Why is the Arafura Resources (ASX:ARU) share price leaping 8% today?

Could this be driving the rare earth developer's stock higher?

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Key points

  • The Arafura Resources share price is currently up 8% at 20.5 cents 
  • While there's been no news from the company, the gain could be due to the rare earth developer's stock's recent tumble 
  • It could also be a delayed reaction to the company's addition to the All Ords, or the price of rare earths 

The Arafura Resources Limited (ASX: ARU) share price is launching upwards today despite no word having been released by the company.

However, there have been several happenings over the last few days that could be boosting the stock.

At the time of writing, the Arafura Resources share price is 20.5 cents, 7.89% higher than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently down 0.49%, while the All Ordinaries Index (ASX: XAO) has slipped 0.6%.

Let's take a look at what might be driving the rare earths developer's stock lately.

Why is the Arafura Resources share price soaring today?

The Arafura Resources share price is well and truly in the green on Tuesday.

Today's movements follow the stock's 5% fall yesterday. It also fell 9% over Thursday and Friday.

Thus, today's gains could be a market correction after its multi-day sell-off.

It could also feasibly be a reaction to recent news from S&P Dow Jones Indices. On Friday evening, the body announced Arafura Resources will be added to the All Ords on 21 March.

Its addition to the index tracking the 500 largest companies on the ASX could see trade in the rare earths company's stock increase later this month.

That's because funds tracking the index will be forced to snap up its shares.

At the same time, fund managers mandated to only trading in All Ords shares might prick their ears towards the stock.

Finally, The Arafura Resources share price might be being supported by the value of rare earths in 2022.

According to reporting from Reuters – published last week – China has called on rare earth producers to help lower the price of minerals needed for electric vehicles and the like.

The publication stated that the price of rare earths were near record highs on Friday.

Interestingly, stock in Arafura Resources' rare earth-focused peers, Lynas Rare Earths Ltd (ASX: LYC) and Iluka Resources Limited (ASX: ILU) are down 2.7% and 3.7% respectively right now.

Despite today's gains, the Arafura Resources share price is 8% lower than it was at the start of 2021.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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