U.S. equities are drifting around the unchanged line on Friday in the wake of a mixed jobs report. Payroll growth was strong, but earnings were soft. For now, this keeps a rate hike from the Federal Reserve at its March policy meeting next week on track. But it raises uncertainty about the odds of another hike or two later in the year.
The other major dynamic on the minds of investors right now is the specter of policy changes out of Washington, D.C., with Congress focused on legislating the Obamacare replacement bill.
GOP leadership has suggested the political rancor and complexities of the matters involved means a tax reform effort might not be seen until 2018.
As a result, expectations of a large infrastructure spending push promised by Presidents Trump are fading — weighing on materials stocks that enjoyed a big run-up during the post-election rally. Here are three steelmakers, in particular, that are looking vulnerable:
Steel Stocks to Sell: Cliffs Natural Resources (CLF)
Cliff Natural Resources Inc (NYSE:CLF) shares are threatening to fall below their multi-month trading range with critical support near $8.50. A breakdown here would set up a test of the 200-day moving average near $7.50 — a drop that would be worth a 12% loss from here.
After suffering a five-year pullback from its 2011 high of $91.22, the stock bottomed at $1.20 in early 2016 before enjoying a tenfold rally into the high set last month.
The company will next report results on May 11 before the bell. Analysts are looking for earnings of 15 cents per share on revenues of $393.5 million.
Steel Stocks to Sell: AK Steel (AKS)
AK Steel Holding Corporation (NYSE:AKS) shares are threatening to fall below their January/February low near $8, putting its 200-day moving average in play as the November/December gains look vulnerable to some profit-taking.
This after hitting double top resistance near $11.40 from the high set in the summer of 2014. After rising tenfold from its early 2016 low, bulls must step up here and now or risk a violation of the two-year uptrend.
The company will next report results on April 25 before the bell. Analysts are looking for earnings of 14 cents per share on revenues of $1.5 billion.
Steel Stocks to Sell: Mechel Steel (MTL)
Russian steelmaker Mechel PAO (ADR) (NYSE:MTL) is threatening to drop below its pre-election pullback low, which would put the 200-day moving average in play. A failure to hold this level would set up a return to the September/October levels near $3 — a 30%-plus decline from here.
The rally from the summertime low has been impressive, nearly quadrupling into the high set in January after suffering a long five-year decline from the 2011 peak of $66.44.
The company remains highly “geared” to steel prices as a result of its heavy indebtedness. Investors grew optimistic a U.S.-led building surge, along with efforts to restructure its obligations to a trio of large Russian banks, would turn the company’s fortunes around. But those hopes are now fading.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers. Redeem by clicking the links above.
