Trading Diary: U.S. steel sector does a complete about face

Steel sector stocks, including U.S. Steel (X) and Cliffs Industries (CLF), does an abrupt about face as Trump opens jawboning efforts on foreign steel dumping.

Small mountains of semi-refined iron ore, known as taconite pellets, headed for U.S. steel mills. (Image via Wikipedia entry on steel, CC 3.0 license)

WASHINGTON, April 20, 2017 – After Wednesday’s vicious market collapse, all’s right with the world on Wall Street Thursday. A majority of sectors (save for defensive sectors like consumer staples and utilities) have done an about face today, bolstered by a number of positives, including President Trump’s order to the Department of Commerce to open an effective anti-dumping investigation of international steel pricing, citing national security as the reason.

Stocks in the steel sector have been savagely beaten over the last month. But in Thursday trading action, these companies are among the strongest stocks across the boards, with averages boosted further, courtesy of a strong quarterly performance by American Express (symbol: AXP). Don’t leave home without them.

Also helping today’s trade was positive news from Washington on the healthcare and tax-reform fronts. True, more heavy squalls could be just ahead. But today, the bulls have come out to play, and we’ll enjoy the fun, at least while it lasts.

Trading Diary

In yesterday’s column, we lamented the pasting we’ve endured in our rather large, speculative position in iron ore miner Cliffs Industries (CLF). We’ve actually reduced that position a bit, taking a loss to bring the size of this position into better balance with the rest of our portfolios.

Well, wouldn’t you know? Just as Cliffs seemed ready to sprint toward penny stock status, Trump’s aggressive remarks, clearly targeting steel dumpers like China and South Korea, acted like a long-awaited spring tonic for the steel sector in general.

All steel companies are up as of Thursday afternoon, with particularly strong action in lagging U.S. Steel (X), up at this point a whopping $2.39 per share (8.41 percent) to stand at $30.81 per share; and our beleaguered Cliffs Industries, currently up nearly 8 percent (+ 0.53 cents) to stand at $7.19 per share, close to its strongest number of the day.

Guess we’ll continue to hold the pile of Cliffs we continue to own. At least for now.

Rumors of another Obamacare “repeal and replace” deal spread the happiness over to the health sector, where our representative holding, Allergan convertible preferred A shares (AGN/PRA at our brokerage, your symbol may vary) also caught a nice bid today after nearly three weeks of negative muddling.

Even our “meh” positions in Blackstone Group (BX) and DC-based Carlyle Group (CG)—our proxies for the financial and banking sector—were heartened by the great quarterly numbers reported by American Express (AXP), with BX and CG both up about 1.5 percent in current market action. We have preferred these two stocks over the regular bank stocks due to their significantly higher dividend payouts, although those payouts can be irregular.

We have had success before with JP Morgan (JPM), and may get back into this one and/or Bank of America (BAC) and Morgan Stanley (MS) as well. Maybe even Goldman Sachs (GS), after its absurdly huge recent pullback.

But as of today, it’s watchful waiting, even if we’re smiling. We’re still generally bullish on the market. But we’re also at a treacherous juncture, re: the EU, North Korea and assorted domestic political nonsense.

That means we’re not about to start buying on a big up-day like today. It’s nearly always better to wait for the upcoming and almost always inevitable markdown sale. Save for “momentum” players, who chase hot stocks routinely, it’s almost never a good idea to chase stocks you want as they’re rocket sledding upwards. That’s how you get left holding the bag, something amateur investors do all the time.

But we won’t be among them, will we?

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