Navistar, U.S. Steel active; Cliffs Natural mandatory down; Yahoo! pops on Alibaba spinoff

By Rebecca Melvin

New York, Jan. 27 – Convertibles traded quietly on Tuesday as the heavily broadcast Northeast storm kept many market players at home even as New York was largely spared the full brunt of the snow and wind that hammered other regions, including Boston. Disappointing earnings pushed equities lower.

“Clients are trickling in and doing small things,” a New York-based convertibles sellsider said early Tuesday.

A feature of the convertibles day was Navistar International Corp., which traded within its prior context as shares slipped again following a move lower in the middle of last week.

United States Steel Corp.’s convertibles were higher in active trade, even as the underlying shares of the Pittsburgh-based steelmaker lagged during the session. After the market close, however, shares popped when the company reported lower fourth-quarter net income that was better than expected.

AK Steel Holding Corp. reported quarterly results earlier Tuesday, and its shares closed up nearly 5%. The AK Steel 5% exchangeables due 2019 were quiet however and not seen to have traded, but they were last at 104.6.

Cliffs Natural Resources Inc.’s mandatory convertible preferred shares and common shares traded lower after the iron ore and coal mining company said that it has begun restructuring subsidiaries in Canada.

The Cliffs Natural mandatory fell 33 cents, or 4.7%, to $6.65, and the Cliffs common stock fell 42 cents, or 5.8%, to $6.80.

Elsewhere, Yahoo! Inc.’s 0% convertible notes due 2018 traded lower, and the underlying shares also lagged ahead of the internet company’s quarterly earnings reported after the market close. The securities popped in after-hours action on news that it is spinning off its remaining stake in Alibaba Group Holding Ltd.

Illumina Inc. also reported earnings after the market. Those results were better than expected, but shares were only fractionally better in after-hours trade.

Selling hit equities with the Nasdaq stock market ending lower by 90.27 points, or 1.9%, to 4,681.50, the Dow Jones industrial average closed down 291.49 points, or 1.7%, to 17,387.21, and the S&P 500 stock index lost 27.54 points, or 1.3%, to 2,029.55.

The results of Microsoft Corp. and a weak outlook from Caterpillar Inc. were said to have weighed on stocks, as did weaker-than-expected durable goods orders, which fell 3.4% for December, compared to a fractional gain that many economists expected.

Meanwhile investors will watch Wednesday for the latest policy statement from the Federal Reserve to be released at the conclusion of its regular two-day meeting to gauge the economic outlook.

Navistar, U.S. Steel active

Navistar’s 4.5% convertibles due 2018 were quoted at 90.25, with the shares down 89 cents, or 2.8%, at $30.61 in the early going. Later the bonds traded as high as 93 with shares paring losses. But they also traded down in the 89 context.

Navistar shares ended down 12 cents, or 0.4%, at $31.38.

The trading day started out really slow, but at the end of the day, it was busier than anticipated, market players said.

“Navistar was active, and X was pretty active,” a New York-based sellsider said, referring to the stock symbol of U.S. Steel.

The U.S. Steel 2.75% convertibles ended the session at 111 bid, 111.75 offered, with the underlying shares closing at $21.27, which was down 6 cents, or 0.3%.

The U.S. Steel convertibles were previously in the 108 to 109 range.

In after-hours trade, the U.S. Steel shares jumped 8.5%.

The company reported net income of $275 million, or $1.83 per share, which was lower compared to $297 million, or $1.93 per share, reported in the year-earlier period but better compared to analysts’ estimates of 87 cents per share.

The company expects that low oil prices will be a drag on its tubular and flat-rolled segments going forward, but it “is encouraged by the potential that improved consumer spending could provide to overall flat-rolled demand,” according to its release.

Yahoo! lower before earnings

Yahoo!’s convertibles had dropped to 111 to 112 during the session, which was down compared to nearly 114 on Monday. At that point, shares were down about a dollar, or 2%, at $48.40. But shares jumped after hours by $3.50, or 7.3%, to $51.49. And the convertibles were 116, according to Trace data.

The company revealed a plan to spin off its Alibaba stake, which will own all of Yahoo!’s remaining shares in the Chinese internet e-commerce giant and assume no debt in the deal. The Alibaba stake, which represents about 15% of the company, is valued at about $40 billion.

Mentioned in this article:

AK Steel Holding Corp. NYSE: AKS

Cliffs Natural Resources Inc. NYSE: CLF

Cliffs Natural Resources Inc. mandatory NYSE: CLV

Illumina Inc. Nasdaq: ILMN

Navistar International Corp. NYSE: NAV

United States Steel Corp. NYSE: X

Yahoo! Inc. Nasdaq: YHOO

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