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Two Ways To Play: Strong-As-Steel Quarter For ArcelorMittal


Strengthen your portfolio in good times and bad.

MT Reports Strong Profits

According to Reuters, ArcelorMittal (MT) reported second-quarter results this morning, and the world's number 1 steelmaker blew out earnings estimates of $2.81 by reporting net income of $4.19 per share even in the face of higher input costs.

The source of the strength was the company's ability to achieve "significant" price increases with contracts that were renegotiated and closed, CFO Aditya Mittal said on a conference call. Further, he expects that trend to continue into 2009. Revenues came in at $37 billion which were also above expectations of $35 billion. Shares rallied as much as 8% in European trading.

From the Bull Pen: We've mentioned a play in MT. Bulls looking for other plays might see one in AK Steel (AKS) as the stock has recaptured its 200 DMA ($54). Sell-stops can be set below that level.

From the Bear Cave: Bears must respect the rally but Steel Dynamics (STLD) near $35 could have some initiating a downside position.

Earnings Review

Bloomberg reports profits at U.S. companies likely dropped the most in at least a decade last quarter. In the S&P 500, company profits have tumbled 24% year-over-year on the 291 companies that had reported as of yesterday. As recently as July 3, analysts had expected a drop of just 11%. In the financial industry profits were expected to tumble 60% but since have fallen 85%. Contrast that with the energy sector which has posted 15% gains so far. Nonetheless, at 24%, it would mark the steepest decline for the S&P 500 index since the second quarter of 1998. For more on the bigger picture, see Professor Bennet Sedacca's Fishing For Bailouts.

From the Bull Pen: For bulls that believe oil prices will ultimately go higher, oil service company Schlumberger (SLB) could be a play off of its 200 DMA ($95). Sell-stops could be set below that level.

From the Bear Cave: Bears are prepared for a rally in the financials, and are eyeing the financial ETF (XLF) with resistance near $25 for a downside play.

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.

Quick Check Around the World

Asian trading closed with the Hang Seng +1.94%, Nikkei +1.58%, Sensex +3.59%, Taiwan +0.80% and Shanghai -0.48%.

Quickly glancing towards Europe, we see the CAC +1.38%, DAX +0.92%, FTSE +1.27%,

As of 8:40 AM EST, S&P futures are up +5 points to 1267, and Nasdaq futures are up +14 points to 1856.

A Look At Commodities

Commodities are lower. Crude oil is lower -0.15 to 122.01. Gold is down -7.80 to 908.70. Silver is of -0.130 to 17.245 and copper is lower -3.70 to 360.00.

The dollar index is lower -0.075 to 73.234.

On the Radar


ADP Employment change: 9kvs. -60 k cons.

Click here to see the full trading radar.

Enjoy Hump Day. Good luck.
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No positions in stocks mentioned.

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