Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Dec. 3. The Bottom Line segment of today’s podcast starts at (2:35), followed by Stocks on the Contrarian Radar©️ featuring X 0.00%↑ at (4:10) for listeners who want to skip ahead.
State of Play
Stocks advanced yesterday to close at fresh record highs. As we eye our board of indicators for signs of direction at 0650, things are quiet:
Stock index futures are once again flat as a board with no major US index moving more than 0.1% from the break-even point;
Commodities are showing some signs of life however. WTI crude oil is up 1% to trade close to $69/barrel. Copper is up 1%;
Cryptos aren’t doing anything with Bitcoin sitting on $94,800, unchanged;
Bonds are completely unchanged. The 2-year yields 4.18% with the 10-year yield sitting on 4.21%, both identical to yesterday at this time.
Today’s Known Events
The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, is out at 1000. Economists expect 7.49 million job openings, a small increase from the 7.44 million recorded last month. The quits levels were a little less than 3.1 million last month, corresponding to 1.9% of the workforce. That’s a slight decrease from the previous month when the quits level was an even 2.0%. There unfortunately isn’t an economist estimate for that.
(“JOLTS” graffiti by author via Grok AI)
The interesting earnings aren’t until after the close at 1600. Among the highlights:
Salesforce (CRM 0.00%↑)
Okta (OKTA 0.00%↑)
Marvell Technology Group (MRVL 0.00%↑)
The Bottom Line
It’s unlikely that JOLTS will trip up all the good holiday cheer, seeing how this is a pretty dated metric (we’re getting October’s numbers today). Still, it’s worth watching just for the quits levels which are not tracked anywhere else.
Things have been uncharacteristically quiet from the Trump camp in several days. That won’t last. Actually, check that. The quiet is over already with the latest news that the new administration will block Nippon Steel’s bid for US Steel (X 0.00%↑).
Stocks on the Contrarian Radar©️
Shares of US Steel dropped on this news. The stock is down 7% overnight to trade below $38/share. That’s a long way from Nippon Steel’s $55/share takeout price:
It sounds like that deal is likely dead at this point. Chances are it wouldn’t have gone through anyway seeing how the Biden administration was also opposed to it. The question is if this presents an opportunity now for one of the most iconic public companies in the US.
The valuation doesn’t exactly scream buy. US Steel is trading at 20x forward earnings and 10x forward cash flows. The price/forward sales multiple is the only cheap one at 0.6x.
The balance sheet is in good shape with no significant debt maturities until late 2026 and ample cash. But sales have been dropping, largely due to the price of steel also falling. Where the revenue run-rate is concerned, where is growth going to materialize? Can the US really become a major steel producer? Does anybody really want that?
To be sure there will probably always be some demand for this company’s product. You need steel for any construction project. At some point X (how much do you think Elon Musk wants that ticker by the way?) will be cheap enough to be a buying opportunity. It doesn’t look like that time has quite arrived yet trading at 20x forward earnings. So The Contrarian will be sitting this one out for now.
Not investment advice!
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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