Sector Snap: Steel shares drop
PITTSBURGH --Shares of steel companies dropped Tuesday as oil prices plunged, the dollar strengthened and a survey showed U.S. manufacturing activity and construction spending slowed in recent months.
Oil prices sank to within sight of $100 a barrel -- the lowest level in five months -- on signs that Hurricane Gustav only grazed U.S. energy infrastructure in the Gulf of Mexico.
The dollar, meanwhile, rose against most other major currencies. That may hurt steel companies as a weak dollar helps boost exports, said Charles Bradford, an analyst with Bradford Research/Soleil Securities.
Shares of the steel companies were dropping along with "everything that's commodity related," he said.
Also Tuesday, a study indicated U.S. manufacturing activity slipped in August and construction spending fell to its lowest level in seven years in July.
The Institute for Supply Management said its reading for the nation's manufacturers fell to 49.9 from 50 in July. The August result met economists' prediction of a reading of 49.9, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR.
A reading below 50 signals contraction. The index has hovered near the 50 "boom-bust" line all year.
The group's inflation index hit a six-month low, however. For the first time in months, there were many items on the list of commodity costs coming down, as prices for copper, corn, fuel oil, natural gas and soybean oil fell.
Though exports expanded, helping to prop up the nation's steel companies and other manufacturers, some analysts said they saw companies being cautious about their plans in the second half of the year. Other analysts read the report as an indicator that the economy would weaken in the months ahead.
Separately, the Commerce Department said construction spending declined 0.6 percent in July, double the 0.3 percent decrease analysts had been expecting.
Shares of ArcelorMittal, the world's largest steel producer, fell $6.11, or 7.8 percent, to $72.19 in afternoon trading. The United Steelworkers union and ArcelorMittal agreed Saturday to a tentative four-year labor contract covering more than 14,000 workers and tens of thousands of retirees. Rank-and-file had given union leaders the authority to launch a nationwide strike if talks had failed.
AK Steel Holding Corp. shares plunged $4.78, or 9.1 percent, to $47.83. The stock has traded between $34.20 and $73.07 over the past year.
United States Steel Corp. shares fell $13.51, or 10.2 percent, to $119.56. The stock has traded in a range of $85.05 to $196 over the past year.
Shares of Nucor Corp. dropped $3.50, or 6.7 percent, to $49. 