What: Shares of manufacturer United States Steel Corporation (NYSE:X) jumped as much as 12.4% in afternoon trading on Wall Street as analysts became more bullish on the steel market.
So what: Credit Suisse upgraded competitor AK Steel from underperform to overperform today and doubled their price target to $7 per share; the analyst also said the market is underestimating the upside potential in scrap and global arbitrage coming this fall. While these factors may indeed help in the future, keep in mind that U.S. Steel has reported $1.9 billion in losses over the past year and is still sitting on over $3 billion in debt.
Now what: Analyst comments or upgrades can often be market movers in the short term, but investors should look at the long-term trends in the metals business. Prices have been low as Asian suppliers have kept the market oversupplied, and that's resulted in a lot of struggles for U.S. metals producers. While the market may be happy with the steel business today, the sentiment can turn on a dime, and until I see a sustainable return to profitability I don't see a reason to jump into U.S. Steel's shares.