Two Reasons US Steel Stock Is Surging Today

U.S. Steel stock is trading with sharp gains today. The company released its third-quarter earnings yesterday after the markets closed. The results came in at the top end of the company’s guidance.

U.S. Steel stock surges

U.S. Steel stock (X) is trading with almost 16% gains as of 1:00 PM ET after yesterday’s earnings release. Today’s upward price action is partially due to overall bullishness in the markets. But it’s also due to the company’s better-than-expected earnings results.

Data released earlier in the day showed a sharp rebound in China’s manufacturing activity. Any positive news about China generally triggers a buying spree in metals and mining stocks. China’s slowdown has weighed heavily on the sector and more than offset Trump’s Section 232 tariffs.

Positive economic data

Plus, US economic data has also been positive. Today, the nonfarm payroll data shattered expectations. August and September jobs data were also revised upward. Strong jobs numbers help allay recession fears. US third-quarter GDP growth also beat expectations, and bears had to run for cover.

To be sure, it’s not a blowout quarter from U.S. Steel. The company’s third-quarter performance was largely within its guidance. However, markets were getting a little too bearish on the stock. As we noted in Why US Steel Short Sellers Might Lose on Their Bets, even a modestly good Q3 performance was enough to trap the bears.

That effect is happening in today’s trading session. Other stocks in the sector, including AK Steel (AKS), Nucor (NUE), and Cleveland-Cliffs (CLF), are also in the green. AK Steel tumbled in yesterday’s session after posting dismal third-quarter earnings.

US steel prices

As we noted previously, US steel prices have likely bottomed. We might see some traction in prices now as domestic steel mills push for price hikes. Any rise in prices would help US steel companies’ earnings. Also, remember that there’s been a sharp fall in US steel companies’ earnings this year amid the slide in prices. X posted a net loss in the quarter while AKS only broke even.

While X’s earnings and positive economic data have helped lift the sector today, watch out for Chinese economic data and progress in the US–China trade talks. Things might seem to have bottomed out, but the sector might still be in the weeds.