Nucor Plunges 4.44%: What's Brewing in the Steel Sector?

Summary
• Nucor's Q2 earnings miss estimates despite higher volumes
• Morgan Stanley cuts price target to $134 amid rising raw material costs
• Steel sector peers like Cleveland-Cliffs (-6.48%) mirror NUE's decline

Nucor Corporation (NUE) has plunged 4.44% to $138.10 on July 29, 2025, amid mixed signals from its Q2 earnings report and sector-wide pressure from rising input costs. The stock has traded between $134.03 and $140.04 intraday, reflecting volatile sentiment. Analysts and market participants are dissecting the earnings lag and Morgan Stanley's revised price target to gauge the steel giant's near-term trajectory.

Rising Raw Material Costs and Earnings Miss Spark Sell-Off
Nucor's sharp decline stems from its Q2 earnings report, which revealed a 0.76% miss relative to estimates despite 0.61% revenue growth. The company attributed the shortfall to rising raw material costs, particularly in its steel mills segment, which are expected to drag on third-quarter earnings. Additionally, Morgan Stanley analyst Carlos De Alba lowered its price target to $134, citing weaker-than-expected guidance. The sell-off intensified as steel prices and investor confidence in the sector waned, with Nucor's own price cuts for hot-rolled coil ($10/t reduction) signaling industry-wide margin pressure.

Steel Sector Under Pressure: Cleveland-Cliffs Leads the Retreat
The steel sector is broadly underperforming, with Cleveland-Cliffs (CLF) plummeting 6.48% to $38.72. Both NUE and CLF face headwinds from elevated raw material costs and cautious demand outlooks. While Nucor's earnings miss highlights operational challenges, CLF's aggressive asset sales and exploration of divestitures underscore sector-wide restructuring. The S&P 500's recent volatility has exacerbated selling, with steelmakers like NUE and CLF trading below their 200-day moving averages (NUE: $130.49 vs. $138.10; CLF: $42.10 vs. $38.72).

Options Playbook: Capitalizing on Short-Term Volatility
• 200-day average: 130.49 (below current price)
• RSI: 59.25 (neutral)
• MACD: 4.58 (bullish) vs. signal line 4.81 (bearish)
• Bollinger Bands: 132.45–147.98 (current price near lower band)

NUE is trading near its lower Bollinger Band ($132.45) and below key moving averages, suggesting bearish momentum. Short-term traders may target a breakdown below $135.50 (30D MA) or $132.45 (lower band) as a trigger for further declines. The stock's short-term bullish trend clashes with long-term ranging patterns, creating a volatile setup.

Top Options:
• NUE20250808P137 (Put)
- Strike: 137, Expiry: 2025-08-08
- IV: 44.79% (high volatility)
- Leverage Ratio: 38.99% (moderate)
- Delta: -0.428 (moderate sensitivity)
- Theta: -0.0215 (slow time decay)
- Gamma: 0.0365 (responsive to price swings)
- Turnover: 96,032 (liquid)
- Payoff (5% downside): $4.65 per share (max profit if NUE drops to $129.70)
- This put offers balanced leverage and liquidity for a 5% downside scenario, with high gamma ensuring responsiveness to price swings.

• NUE20250808P132 (Put)
- Strike: 132, Expiry: 2025-08-08
- IV: 35.04% (moderate)
- Leverage Ratio: 138.40% (high)
- Delta: -0.205 (moderate sensitivity)
- Theta: -0.0299 (moderate time decay)
- Gamma: 0.0338 (responsive)
- Turnover: 10,477 (liquid)
- Payoff (5% downside): $6.33 per share (max profit if NUE drops to $129.70)
- This put provides high leverage and sufficient liquidity, ideal for aggressive short-side bets given NUE's proximity to support levels.

Trading View: Aggressive bears may target NUE20250808P132 into a breakdown below $135.50, while NUE20250808P137 offers a safer play with higher gamma for volatile swings.

Backtest Nucor Stock Performance
The backtest of NUE's performance after a -4% intraday plunge shows favorable short-to-medium-term gains. The 3-Day win rate is 51.72%, the 10-Day win rate is 54.55%, and the 30-Day win rate is 52.82%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 0.43%, which occurred on day 59, suggesting that while the gains may be modest, they can still lead to positive outcomes if held for an appropriate period.

Steel Sector's Crossroads: Time to Rebalance Exposure
Nucor's 4.44% drop reflects broader steel sector fragility, driven by cost pressures and cautious demand outlooks. While technical indicators suggest short-term bearish momentum, long-term fundamentals remain intact, with NUE's 52W high at $170.52 and Morgan Stanley's $134 price target offering a wide range. Investors should monitor Cleveland-Cliffs' (-6.48%) asset sales and NUE's 132.45 support level for directional clues. For now, options like NUE20250808P132 and NUE20250808P137 provide high-leverage hedges against a 5% downside. Act now: Short-side positions into a breakdown below $135.50, and watch for sector-wide catalysts like Trump-era tariff adjustments.