Investors are dealing with a lot right now, and the stock market's big decline over the past week has shown just how sensitive Wall Street is to the changing macroeconomic environment. The Federal Reserve's need to boost short-term interest rates by three-quarters of a percentage point didn't provide any confidence to the investing community. After the drop that sent the S&P 500 (^GSPC -1.20%) into bear market territory, though, stock investors seem to be ready for at least a brief reprieve. As of 8:30 a.m. ET, futures on the Dow Jones Industrial Average (^DJI -0.65%) had risen 177 points to 30,105. S&P 500 futures had gained 28 points to 3,697, and Nasdaq Composite (^IXIC -1.79%) futures had picked up 119 points to 11,244.
Market participants have largely watched the tech arena for signs of a recovery, given that the stocks there have seen such dramatic declines. However, there are some interesting things going on in the steel industry that many investors haven't noticed. Good news there could signal the kind of economic activity that could lead an economy out of recession and help spur a broader stock market bounce. Below, you'll learn more about what United States Steel (X -1.23%) and its peers have said in recent days and how it could bring about an end to the bear market.
Guidance as tough as steel
U.S. Steel provided guidance for the second quarter of 2022 late Thursday. It was generally favorable, and the stock jumped nearly 7% in premarket trading on Friday as a result.
The Pittsburgh-based steel company said it expects its adjusted pre-tax operating earnings to come in at about $1.6 billion, which would be a record level for this time of the year. That should translate into adjusted earnings of between $3.83 and $3.88 per share.
U.S. Steel cited strong industry conditions for all of its business segments, with each unit not only helping on the sales front but also contributing to profitability. Because U.S. Steel has a diverse customer base, it's able to benefit when certain industries are performing extremely well. In this case, the surging energy industry has been a key contributor to U.S. Steel's gains, as high oil and natural gas prices have spurred demand.
In particular, U.S. Steel sees its flat-rolled steel business doing particularly well. Higher shipment volumes should bolster sales, and availability of raw materials is greater once the winter months end. The company's European business is seeing meaningfully higher selling prices that should offset rising raw materials prices.
Building on good news
The report from U.S. Steel comes right after favorable guidance from other steelmakers. Steel Dynamics (STLD 0.24%) said Thursday morning that its second-quarter adjusted earnings would be between $6.61 and $6.65 per share, well above expectations. That followed gains on Wednesday for Nucor (NUE -0.27%), which cited strong end use market demand for steel products that should produce record earnings of $8.75 to $8.85 per share for the mini-mill specialist. Nucor shares were up more than 1% Friday morning, while Steel Dynamics was unchanged.
Nonresidential construction has been a key demand driver for steelmakers, and at least for now, activity there hasn't shown major signs of slowing. Supply chain issues have caused enough of a backlog for construction projects that the pipelines remain relatively full. That could provide additional support for prices for the foreseeable future.
Many economists and market prognosticators are calling for a recession that could worsen the bear market conditions on Wall Street. However, policymakers often turn to construction and infrastructure projects to prop up the economy, and that's exactly the type of business that can help steel stocks in the long run. Investors should keep a close eye on U.S. Steel and other steelmakers to see what happens to their business fundamentals as 2022 proceeds.
