United States Steel Corporation (NYSE:X) and other steel-related stocks took a significant hit on Monday thanks to the unlikeliest of culprits: failed healthcare reform.
X stock was off more than 4%, as was AK Steel Holding Corporation (NYSE:AKS), and Steel Dynamics, Inc. (NASDAQ:STLD) was down more than 2% amid a reverse “Trump bump” trade on the heels of the American Health Care Act’s failure late last week.
The reasoning has nothing to do with the bill itself, of course, but instead the questions of “what’s next?” That’s because the failure of one of Donald Trump’s many campaign promises has brought into doubt the timing of some of his next action items — and even whether he’ll be able to push those through.
The promise of a monster infrastructure spend has steel equities like X stock, as well as other infrastructure plays, down solidly on Monday morning. But the insecurity is also hitting other sectors, such as financials, which were promised a much lighter regulatory environment under the GOP. Bank of America Corp (NYSE:BAC) is helping lead the way down with 2%-plus losses.
U.S. Steel has been one of the biggest beneficiaries of Trump-spurred buying, up roughly 65% since the November elections through the end of last week.
On the flip side, U.S. Steel has also picked up quite a bit of short interest, with a bit more than 11% of the float sold short as of the most recent data.
X stock has been letting off steam since late February, and had already crossed below its 20- and 50-day moving averages in recent weeks — and in fact, the shorter-term MA is close to crossing below the 50-day — a short-term technical bearish signal that U.S. Steel could do without.
Now, X shares are trading around the $31.40 level — a bit of price support that the stock last hit at the start of February. Should X stock break below there, it faces what should be strong technical support at its 200-day moving average, which currently sits at $26.60.
Still, that would be another 15% drop from here.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.