Morgan Stanley Downgrading U.S. Steel

Morgan Stanley is out with a research report on U.S. Steel X and is downgrading shares to Equalweight from Overweight, and is lowering the price target to $48. In a note to clients, Morgan Stanley writes, "Despite the recent sell-off, we think it is too early to buy the group as a whole. We would invest selectively, and recommend AKS ($8.18), our top pick, for stock-specific reasons, and NUE ($32.61), an upgrade, as a defensive play with considerable upside. Our new base case incorporates slower steel demand growth in 2H11 and 2012. We are trimming our estimates (by 18% on average) and price targets (by 22% on average). We are rotating into NUE and out of X ($27.25) and STLD ($11.67). Despite large upside to our X and STLD price targets, NUE's Sharpe, Treynor and base/bear ratios point to better risk-adjusted returns." Shares of X are down 19 cents in pre-market trading to $27.06, a loss of 0.7%.