Cleveland-Cliffs Surges as Markets Test a Rebound

Grant Calloway

Welcome to the Bull Sheet podcast. Friday, I left you with a question. Could the ten year Treasury yield hold near five point oh six percent after the Fed dropped its forward guidance? And I told you to circle two names, Cleveland Cliffs before the open and AGNC after the close. Well, the ten year is sitting at about five point oh seven five percent this morning, easing a couple of basis points. And Cleveland Cliffs just made me look smart. I'll take it. It's Monday, October nineteenth.

Grant Calloway

Let's start with that steel print, because it's the story of the morning. Cleveland Cliffs reported third quarter adjusted earnings of twenty eight cents a share against a consensus around twenty four cents, on revenue of about five point six billion dollars. The number that matters is adjusted EBITDA: six hundred twelve million dollars. The company had guided to five seventy five, and the second quarter was two eighty six. That's more than double in one quarter. Average selling price climbed to eleven seventy seven a net ton. CEO Lourenco Goncalves said, quote, third quarter was our strongest quarter in three years, end quote.

Grant Calloway

Now the part that's moving the stock. Cliffs guided fourth quarter adjusted EBITDA to roughly seven hundred fifteen million. And it says that, based on new customer contracts already signed and prevailing index price forecasts, it expects 2027 adjusted EBITDA to exceed four billion dollars. Shares are up double digits in premarket, somewhere between about twelve and sixteen percent depending on when you looked, from a Friday close near twelve dollars and twelve cents. There's a wrinkle. The company is indefinitely idling its galvanizing lines at Stelco in Canada, citing an oversupplied market, and says that preserves roughly two thousand jobs. And leverage is still the thing to watch. Management says it's targeting under two and a half times net debt to EBITDA by the middle of next year. Good print. Not a finished story.

Grant Calloway

Now the tape. Futures are pointing higher after last week's semiconductor rout. S&P 500 futures are up about four tenths to half a percent, in the neighborhood of seven thousand seven hundred fifty. Nasdaq 100 futures are up about one percent or a touch more, a relief bounce. Russell 2000 futures are up about four tenths. The Dow is flat to a hair either side of unchanged. All of this is as of early this morning, so treat it as a snapshot.

Grant Calloway

Overnight was a split screen. In Asia, China said third quarter GDP grew four point five percent from a year ago, ahead of expectations. Shanghai gained about three quarters of a percent, and the offshore yuan strengthened to around six point six eight per dollar, its strongest since June of 2022. Japan's Nikkei fell six tenths of a percent, after dipping more than two percent early on Bank of Japan inflation vigilance. Europe is the ugly one. Weekend riots in France have the Stoxx 600 down about one percent and the CAC 40 down about one and a half, near six month lows. European banks are off more than two percent. French ten year yields jumped nine basis points to about four point eight seven five percent, and the gap over German bunds is widening. London is the calm one, basically flat.

Grant Calloway

Cross asset, quickly. Brent crude is down about one point three percent near one hundred eight forty, pulling back from Friday's five month high above one hundred ten. WTI is near one hundred one fifteen. The dip follows President Trump's announcement waiving certain sanctions and tariffs on Russian oil exports. Hormuz tanker tensions are keeping supply worries on the table, though. The dollar index is up a tenth near one oh one nine, and the euro is slipping on the French jitters. Gold is steady around forty one eighty five an ounce. Bitcoin is up about one point six percent, back above eighty two thousand.

Grant Calloway

On to the movers, and I'll keep them across the map. Silgan is up about four and a half percent premarket. It's forming a joint venture with American Industrial Partners to acquire Trivium Packaging at a three point four billion dollar enterprise value, combining it with Silgan's metal container business. Silgan gets about two point three billion in cash to pay down debt, keeps sixty percent, and projects at least fifteen percent adjusted EPS accretion. Fifth Third is steady to a bit higher. Adjusted earnings were a dollar thirteen against a dollar oh nine expected. GAAP was ninety cents, because of merger integration charges tied to the Comerica conversion. Net charge offs were just thirty one basis points. Disc Medicine is up more than thirty percent, and at points over forty, ahead of Phase 3 APOLLO trial results for bitopertin in EPP. The company has an eight a.m. Eastern webcast, so that stock is trading on anticipation until the data lands. And VinFast is active after a loss of fifty three cents a share, wider than the thirty six cents expected, while it pushes lease deals under thirteen dollars a day on its 2027 VF 8 and VF 9.

Grant Calloway

A quick word from our sponsor. This show is brought to you by Jellypod. If you ever wanted to turn your own reading pile into a podcast, head to jellypod.com. Back to the tape.

Grant Calloway

Now the debate. The question: is this morning's bounce a real rotation toward cash rich cyclicals, or a relief rally with a short fuse? Let me argue the bull first, and I'll mean it.

Grant Calloway

The bull says look at what's actually printing. Steel with signed contracts, and 2027 guided above four billion. A packaging company turning a deal into two point three billion in debt reduction. A regional bank digesting an acquisition with thirty one basis points of charge offs. That's pricing power and discipline, not hope. The ten year held near five point oh seven five after last week's retreat from above five point one nine. And Brent is off its high. The economy is doing its job without anybody coddling it.

Grant Calloway

The bear says hold on. The Philadelphia semiconductor index just had its longest losing streak since 2008, because roughly one point two trillion dollars of projected 2027 hyperscaler spending still has to show a return. Yields above five percent leave valuations no margin for error. France is wobbling. And oil only slipped because of a waiver, which can be reversed, not because anyone added supply. If Meta or the chip equipment names stumble this week, this bounce is just a pause in the middle of the fall.

Grant Calloway

Where do I land? Both of them are right about the facts, and that's the problem. I give the bull the earnings, because Cliffs and Fifth Third are real numbers with real cash behind them. I give the bear the calendar, because the biggest tests haven't happened yet. So I'd call this a rebound with a quality tilt, not an all clear. Notice that the strength this morning is in the companies that actually make things. The doubt is in the companies that promise things. Both can hold for a few days. They probably can't hold forever.

Grant Calloway

On deck. Economic data is light. The NAHB Housing Market Index for October comes at ten a.m. Eastern, consensus thirty two, prior thirty two. Treasury auctions three month and six month bills at eleven thirty. After the close, Steel Dynamics reports with an EPS estimate of five forty two, and AGNC, the one I flagged Friday, with an estimate of thirty nine cents. Also Crown Holdings, W.R. Berkley, Western Alliance, and Zions. Tomorrow is a heavy one before the open: GE Aerospace, RTX, 3M, General Motors around six thirty Eastern, Northrop Grumman, and Halliburton. Then Netflix and United Airlines after the close, which sets the stage for Meta and Tesla on Wednesday.

Grant Calloway

What matters most today: whether that ten year stays near five oh seven and whether the Nasdaq bounce survives the morning. Tune in tomorrow, when the industrial earnings parade starts. A tape this jumpy is like a horse that just got spooked. It looks calm until the next loud noise. And a quick reminder: this podcast is for educational purposes only and is not investment advice.