Dow Jones Back to 10,000 Fueled by Citigroup, AK Steel, Goldman Sachs

Major equities staged a late day comeback as the Dow Jones Ind. peaked back above 10,000.  Leading the charge was AK Steel (NYSE:AKS) moving up 12%, Goldman Sachs (NYSE:GS) gaining 4.65% and Citigroup (NYSE:C) as the most active stock.

Goldman Sachs (GS) shares have gained back 5% since last Thursday when shares hit $136 and just a few bucks away from a new 52-week low.  Last week Goldman Sachs (NYSE:GS) released a report today saying the equity market for companies in the S&P 500 are considered more bullish after markets viewed them as bearish last week. Suggestions from Goldman were investors should look at buying put spreads on the Industrial SPDR ETF (NYSE:XLI), as a way to take advantage of the discrepancies in risk between credit and equities.

The Goldman report also looked differences between what was driving concerns of the equity and credit markets.  Pefect timing as Goldman Sachs shares are now down 18% in 2010.  Goldman Sachs under pressure from the SEC and still taking heat from CEO Lloyd Blanfein's latest media adventure.  The SEC gave Goldman another 60 days to respond to the fraud charges which simplies they’re open to settling the case, which reports are Goldman have been pressing them to do.

CITI LIKES AKS
Citigroup (C) analyst Brian Yu wrote in a note to clients that he likes metal stocks in general, and AK Steel (AKS) in particular, upgrading the company to a “Buy” rating.  Yu said, “We believe metals stocks offer good value here.”

Yu recognizes the downward pressure on iron ore prices resulting from China’s move to battle inflation, which is expected to lower demand of iron ore and other metals in the country, but adds in the case of AK Steel, that many people aren’t focusing on their exposure to stainless steel, which seems to be what Yu believes will help drive the company in a slowing iron ore environment.

The recent major increase in iron ore prices, which has already happened, remains a concern in the short term performance of the company. The potential fall in iron ore prices long term is what I meant in the above comments on downward pressure. Yu realizes that much of the correction is justified for AK Steel, he is of the “opinion, the correction [in AK's stock price] is overdone.”

In line with his thinking, even though he upgraded the stock, Yu still cut his price target for the shares for earnings from $1.80 to $1.40, and the price target of the stock to $19 over the next 12 months.

SOURCE: http://www.americanbankingnews.com/2010/05/25/citigroup-nysec-likes-metals-upgrades-ak-steel-nyseaks-to-buy/