By Angela Palumbo
Cleveland-Cliffs stock was rising Thursday after a GLJ Research analyst double upgraded the shares, calling the steel stock a "defensive play" in a high interest rate environment.
Gordon Johnson upgraded shares of Cleveland-Cliffs to Buy from Sell with a $27.20 price target, which implies a 23% increase from the stock's closing price on Wednesday.
Johnson wrote in a research note Thursday that he believes interest rates are actually headed higher "as bond market investors demand higher yields to compensate for what we believe will be much higher than expected inflation."
Higher interest rates aren't good news for growth stocks such as big tech. Johnson believes these higher rates will likely drive investors out of tech and growth stocks and into value stocks.
Johnson also said he sees both a "Trump put" and "Biden put" on the steel sector for whoever wins the presidency in the upcoming election. In laymen's terms, Johnson is saying that both presumptive nominees of their parties won't let steel prices drop too far before stepping in and limiting overseas imports.
The analyst cited tariffs put in place by Trump during his presidency. He also cited Biden's statement earlier this month that it is "vital" for U.S. Steel to remain an American steel company that is domestically owned and operated, in reference to its potential acquisition by Japan-based Nippon Steel. Both are reasons for optimism about the stock, the analyst said.
Shares of Cleveland-Cliffs were up 2.2% Thursday to $22.63. The stock has risen 10% this year. The S&P 500 was up nearly 0.1%.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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(END) Dow Jones Newswires
March 28, 2024 12:33 ET (16:33 GMT)
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