Metals Stock Losers: U.S. Steel

Investors fled cyclical stocks Friday on a bevy of gathering worries, from the labor market to the oil spill disaster to Europe's ongoing debt crisis.
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(Metals and mining story updated with additional details from Goldman Sachs' note on U.S. Steel on Friday.)

NEW YORK (

TheStreet

) -- Cyclical stocks took a spin off a cliff Friday, with

U.S. Steel

(X) - Get Report

pacing the decliners, as

disappointing employment data

combined with European contagion fears to provide jittery investors with reasons to exit high-beta names throughout the metals and mining sectors.

Volatility remains the status quo. Two days after optimistic signals sparked a

rally in metals stocks

, a broad sell-off in U.S equities erased those gains and more, with the

Dow Jones Industrial Average

plunging more than 300 points late in Friday's session.

Goldman Sachs

(GS) - Get Report

added fuel to the fire, at least in U.S. Steel's share-price decline Friday. Just three weeks after

elevating U.S. Steel to its "conviction buy list"

the firm saw fit to remove it. Goldman's metals specialist, Sal Tharani, cited a basket of fresh challenges facing the company's shares, including Europe's weakening economy as the E.U.'s members attempt to handle a spreading debt crisis, and recent softness in the price of iron ore on the spot market.

Because the vertically integrated U.S. Steel controls its own iron-ore sources, it benefits from a rise in the price of the raw material. Tharani maintained his buy rating on the stock based largely on this fact.

But another cloud has fallen over the company's stock: the

BP

(BP) - Get Report

oil spill

. That's because nearly a third of the tonnage produced by U.S. Steel goes into so-called Oil Country Tubular Goods -- that is, the steel pipes used in oil rigs and pipelines.

Tharani noted, however, that U.S. Steel's products are mostly used in natural gas wells and pipelines rather than offshore OCTG applications.

Shares of U.S. Steel finished the session at $41.99, down $3.29, or 7.3%, after falling as low as $41.39 intraday. Volume reached nearly 26 million shares, compared with daily average turnover of about 18 million.

Among other steel stocks,

ArcelorMittal

(MT) - Get Report

lost 5.6%,

AK Steel

(AKS) - Get Report

retreated 7.9%; and

Steel Dynamics

(STLD) - Get Report

slid 4.2%. Shares of the distribution company

Reliance Steel & Aluminum

(RS) - Get Report

gave up 5.5%.

Miners fared worse.

Teck Resources

(TCK)

stock plunged 8.5%;

BHP Billiton's

(BHP) - Get Report

American depositary receipts shed 6.8%; and

Cliffs Natural Resources

(CLF) - Get Report

lost 7.5%.

One encouraging factoid regarding the mining sector was buried in the jobs report Friday, as portfolio manager and

RealMoney

contributor Don Dion

pointed out in a recent column

: mining was one of the few industries with a healthy labor market, adding about 10,000 jobs in May.

Still, indications were that large hedge funds were upping their short positions in tradeable metals such as copper and aluminum.

"It's tough to bet against that in short term," one metals analyst cautioned. "It's probably still early to catch falling knives."

-- Reported by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.