Steel ETFs Secure Solid Gains in October
Commodity ETFs News:
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- ETF Chart of the Day: Metals and Mining
- Natural Gas ETF Falls Below 200-Day Trend for First Time in Three Months
Stronger third quarter earnings have boosted the steel sector and solidified the uptrend for the exchange traded fundMarket Vectors Steel Index Fund (NYSEArca: SLX). U.S. Steel (NYSE: X), the nation’s largest steelmaker, has posted two consecutive quarters for profit.
“The stocks are up because of the good economic news,” Michelle Applebaum, analyst with Steel Market Intelligence, said on Reuters. “Reliance beat, and they had a great third quarter, but their guidance for the fourth quarter was short.”
Reliance Steel $ Aluminum Co. (NYSE: RS ) reported sales at $2.14 billion, up 29%, and shares rose to $43.08, which gained $10 over the October rally, reports Reuters.
U.S. Steel posted a profit of $22 million as steel prices were higher in the third quarter. Demand could wane for steel if developed economies continue to slowdown, reports Associated Press on The Washington Post.[Will Steel Dynamics Earnings Reinforce ETFs?]
“In the U.S., the the company is 80% self-sufficient in coke and almost completely self-sufficient in iron-ore. This vertical integration gives the company a cost advantage over its competitors as it sources the majority of its raw materials at cost and mitigates cost volatility,” wrote Bridget Freas for Morningstar. [The Contrarian: A Look at oversold ETFs]
The rally in the steel sector can be attributed to the news that Europe has a plan to quell the sovereign debt crisis, and the upbeat economic reports coming from the U.S. For the longer term, steel prices will have to grapple with a slowdown in emerging economies and the possibility of economic malaise in developed nations.
SLX gained over 20% in October. PowerShares Global Steel Portfolio (NYSEarca:PSTL) is another steel ETF.
Market Vectors Steel Index Fund
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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