Morning Commentary: U.S. Steel jumps outright, adds on hedge after earnings; EZCorp adds on hedge

Rebecca Melvin

New York, July 30 – U.S. convertibles players were focused early Wednesday on a few companies after they reported earnings.

United States Steel Corp.’s 2.75% convertibles due 2019 surged on both an outright basis and on a dollar-neutral, or hedged, basis after the Pittsburgh-based steelmaker reported a narrower second-quarter loss and said that operating income for all of the company’s businesses are expected to increase significantly in the third quarter compared to the second quarter.

U.S. Steel’s convertibles were quoted at 143.875 with the underlying shares at $33.00.

That was up 1 point dollar neutral, a New York-based trader said. U.S. Steel shares surged $5.00, or 18%, to $32.67.

EZCorp Inc. was also better by about 0.5 point on a dollar-neutral basis after earnings with the stock of the Austin, Texas-based pawn store operator higher, the trader said.

EZCorp’s 2.125% convertibles due 2019 were quoted at 91.25 bid, 92.25 offered with the underlying shares at $10.04.

EZCorp missed earnings estimates by 2 cents but reported revenues in line with guidance and reaffirmed current earnings per share guidance.

Investors were also chewing on a few new pieces of economic data Wednesday. Gross domestic product jumped at a seasonally adjusted annual rate of 4% in the second quarter, which was greater than the 3% pace that economists were expecting.

The Commerce Department said Wednesday that an upturn in inventory building and an acceleration in consumer spending led the broad gains and offset a larger drag from increased imports. The gain also offsets the first quarter when the economy contracted to a 2.1% pace.

Meanwhile, private sector employment increased by 218,000 jobs from June to July, according to the ADP National Employment report for July.

The July employment gain was softer than June but remains consistent with a steadily improving job market, Mark Zandi, chief economist of Moody’s Analytics, said. At the current pace of job growth, unemployment will quickly decline, he said.

Equities were trading mixed to lower after early strength.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.