United States Steel Corp. (X), whose colleagues include AK Steel (AKS) and Nucor Corp. (NUE), was sold off by investors on Tuesday after the company released its first-quarter results. The stock dropped $3.44, or 5.7%, to $56.63. Volume was strong.

The company is definitely far away from the 52-week low, but it unfortunately is also significantly under the 52-week high of $70.95. The one-year chart shows an up-and-down pattern that isn't necessarily for every investor. Indeed, the most recent price action has been decidedly in the downward direction. Of course, that might mean the business is worth a look, especially when you take into account the ultimate bias towards an upward trend. Let's check out the Q1 numbers.

Worthington Industries (WOR), a metals manufacturing entity based in Columbus, Ohio which counts AK Steel (AKS) as a colleague, issued third-quarter results on Thursday morning. By the end of yesterday's session, the market had spoken: it didn't like the data at all. The stock ended in the red by well over 6%, on strong volume.

According to the press release, net income became a net loss this time around, coming in at 22 cents per share. That compared to a positive profit of 2 cents per share in the similar quarter in 2009. Cash flow for the nine-month period fell 40%. Cash was used for operations in Q3 itself.

AK Steel Holding Corporation (NYSE: AKS) is due to report earnings tomorrow before the market opens, and the company is expected to post another quarterly loss.

The current recession has been tough on steel makers, and Ohio based AK Steel is no exception. The company has been forced to lower prices and lay off workers in the wake of slumping demand for its steel products.

It takes nerves of steel to buy stocks in this market. Although much of the carnage has passed and is presumably priced into stocks, there is still risk in this market.

Thus far, investors are avoiding those risks preferring the safety of Treasury securities.

Despite the Federal Reserve doing everything in its power to support the economy and to encourage risk-taking, investors are not taking the bait.

What are they waiting for?

Granted, my own analysis of the market suggests that another round of selling may be right around the corner, creating a real buying opportunity in March or April.

That said, in many instances there is no point in waiting or trying to exactly time the market. Many stocks have absolutely caved to the point that there is little downside remaining.

One such stock is AK Steel (NYSE: AKS).

Nucor (NYSE: NUE), an operator steel mills and marketer of steel products, closed at $32.27 Tuesday. NUE December option implied volatility of 91 is above its 26-week average of 73 according to Track Data, suggesting larger price movement.

AK Steel (NYSE: AKS), a producer of steel products, closed at $6.86 Tuesday. AKS December 7.5 straddle is priced at $2.40, January 7.5 straddle is priced at $3.50. AKS January option implied volatility of 158 is above its 26-week average of 102 according to Track Data, indicating larger price movement.

Mechel Steel (NYSE: MTL) closed at $4.59 Tuesday. MTL is a Russian mining, steel and power company. MTL December 5 straddle closed at $2.25, January 5 straddle closed at $3.15. MTL April option implied volatility of 185 is above its 26-week average of 117 according to Track Data, suggesting larger price fluctuations.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

AK Steel (NYSE: AKS) shares are trading higher today after Standard & Poor's announced they have added the stock to the S&P 500 index. These announcements drive stock prices higher since any mutual fund that is tracking the S&P 500 will need to add AKS to its holdings soon. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AKS.

After hitting a one-year low of $27.90 in August, the stock hit a one-year high of $73.07 in May. AKS opened this morning at $65.74. So far today the stock has hit a low of $65.42 and a high of $68.10. As of 12:30, AKS is trading at $67.18, up $4.00 (6.3%). The chart for AKS looks neutral and deteriorating, while S&P gives the stock a bearish 2 Stars (out of 5) Sell rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just three weeks as long as AKS is above $55 at July expiration. AKS would have to fall by more than 18% before we would start to lose money. Learn more about this type of trade here.

AKS has not been below $55 since April and has shown support around $63 recently. This trade could be risky if the global economy tanks in the next few weeks, but even if that happens, this position could be protected by the support the stock might find around $63, where it has bounced twice in the past month.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AKS.

TheStreet.com's Jim Cramer says the different reactions to these earnings underscore the difference between two good quarters.

You have to contrast a Coach (NYSE: COH) (Cramer's Take) with a US Steel (NYSE: X) (Cramer's Take) to get a sense about where this market is going.

First, the obvious -- there are too many Coach bags and bags of its ilk, and there isn't enough steel. Second, Coach couldn't pass on a price increase to save its life. Every price increase sticks for US Steel.

Third, on the Coach call where does Lew Frankfort -- who is great! -- want to expand? The U.S. Ouch! Worst market in the world. Saturated. No growth. Feeling poor.

Where does US Steel want to expand? Doesn't matter. The demand is so great it's really an issue of shipping, as CSX's (NYSE: CSX) (Cramer's Take) Michael Ward would tell you -- at least he told me last night on "Mad Money."

TheStreet.com's Jim Cramer says U.S. Steel is a puzzle, and he ponders how to play it here.

U.S. Steel (NYSE: X) (Cramer's Take) presents the ultimate conundrum. It is hitting on all cylinders, courtesy of the incredible demand for steel domestically because of pipelines. And it is finally not suffering from dumped imports, because the dumpers are from countries growing so much faster than we are that they need all the steel they can get - China, for example, is struggling to build its own share instead of dumping.

John Surma, the CEO, has taken this once-great company right back to greatness with a rise from $9 to $127 in five years. That defies gravity. He has done that by cutting labor costs and growing the business, he has done it by emphasizing areas he can dominate and cutting ones he can t. And he has done it by taking advantage of the 30 bankruptcies in this sector, leaving him one of the few publicly traded companies left, including Nucor (NYSE: NUE) (Cramer's Take), which is a great company, AK Steel (NYSE: AKS) (Cramer's Take), which levitates all of the time on takeover talk and then DOESN'T come in, and Reliance (NYSE: RS) (Cramer's Take), which is another fave of mine.

AK Steel (NYSE: AKS), a flat-rolled carbon, stainless and electrical steel producer, is recently up $1.40 to $50.04. AKS is expected to report EPS on 10/23. AKS call option volume of 18,037 contracts compares to put volume of 14,916 contracts. AKS October 50 straddle is priced at $2.85. AKS November option implied volatility of 63 is above its 26-week average of 52 according to Track Data, indicating traders positioning themselves for a larger share price movement.

Intuitive Surgical (NASDAQ: ISRG), develops, manufactures and markets robotic technologies designed to improve patient returns. ISRG is expected to report EPS after the close on 10/18. CIBC says, "We feel the current valuation is reflecting expectations for another blowout in 3Q." ISRG call option volume of 6,005 contracts compares to put volume of 6,620 contracts. ISRG October 250 straddle is priced at $31. ISRG November option implied volatility of 71 is above its 26-week average of 49 according to Track Data, suggesting traders are positioning themselves for large price risk.

Daily options update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

AK Steel Holding Corp. (NYSE: AKS), a flat-rolled carbon, stainless and electrical steel producer, is recently up $1.39 to $50.63. The DealReporter said several steel companies are interested in AKS according to sources. AKS is expected to report EPS on October 23. AKS call option volume of 15,243 contracts compares to put volume of 2,502 contracts. AKS October 50 straddle is priced at $3.75. AKS November option implied volatility of 60 is above its 26-week average of 51 according to Track Data, suggesting larger price risks.

Mechel Steel (NYSE: MTL), a Russian mining and metals company, is recently up $6.26 to $72.23 after reporting its operational results for nine months. MTL November option implied volatility of 55 is above its 26-week average of 43 according to Track Data, suggesting larger price risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MOST NOTEWORTHY: Boston Scientific (BSX), Medtronic (MDT), St. Jude Medical (STJ), Bankrate (RATE) and AXA (AXA) were today's noteworthy initiations:

• Thomas Wiesel initiated coverage of the Medical Devices Industry:
• Boston Scientific (NYSE: BSX) was initiated with an Underweight rating, expecting shares to Underperform peers due to reductions in estimates, risks to the stent business and valuation.
  
• Medtronic (NYSE: MDT) was initiated with an Overweight rating, saying attractively valued as they believe the growth in underlying markets may be more robust than the current sentiment suggests.
  
• St. Jude Medical (NYSE: SJT) was initiated with an Overweight rating, saying shares offer exposure to attractive drivers, a management team with the best track record in the segment, and a potential acquisition candidate.
  

• Stephens believes the recent weakness in Bankrate (NASDAQ: RATE) due to "turmoil" in the market has created an attractive entry point, starting shares with an Overweight rating.

• Morgan Stanley assumed coverage of AXA (NYSE: AXA) with an Overweight rating, citing an attractive risk/reward and strong free cash flow...

OTHER INITIATIONS:

• S1 Corp (NASDAQ: SONE) was initiated with a Market Perform rating at Avondale.

• Needham started Blue Coat Systems (NASDAQ: BCSI) with a Buy rating.

• Credit Suisse initiated AK Steel (NYSE: AKS) with a Neutral rating.

• Jefferies started Molex (NASDAQ: MOLX) with a Hold rating.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MAJOR PAPERS:

• The Wall Street Journal (subscription required) reported that Microsoft Corporation (NASDAQ: MSFT) has launched a new, free Web-based email, called Windows Live Hotmail, available in 36 different languages.
• The Wall Street Journal reported that House lawmakers will challenge a deal made by House Financial Services Chairman Barney Frank and the U.S. Treasury to overhaul the supervision of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).
• The Wall Street Journal's "Heard on the Street" column wrote that investors are betting that dealmaking is not done in commodities, with United States Steel Corporation (NYSE: X) and Alcoa Inc (NYSE: AA) among those that could receive takeover offers.
• The Financial Times (subscription required) "Alphaville" section reported that Arcelor-Mittal (NYSE: MT) is looking at AK Steel Holding Corporation (NYSE: AKS), with a offer of as mush as $40 a share.

OTHER PAPERS:

• The New York Times reported, citing investigators, that Chevron Corporation (NYSE: CVX) is preparing to acknowledge that it should have known kickbacks were being paid to Saddam Hussein on oil the company bought in Iraq.

WEBSITES:

• DigiTimes.com reported that Aruba Networks Inc (NASDAQ: ARUN) CEO Dominic Orr said that the company is expecting to nearly double its share in the global enterprise mobility solution market in 2008 from 10%-12% to around 20%.

MOST NOTEWORTHY: The more notable initiations today included THQ Inc (THQI), LaSalle Hotel Properties (LHO) and OfficeMax Inc (OMX):

• William Blair started THQ Inc (NASDAQ: THQI) with an Outperform rating, as they are positive on shares based on earnings upside potential from the new video game cycle.

• RBC initiated shares of LaSalle Hotel Properties (NYSE: LHO) with an Outperform rating and $52 target, as the firm expects growth to be driven by portfolio repositioning efforts and renovations.

• OfficeMax Inc (NYSE: OMX) was initiated at Bear Stearns with a Peer Perform rating citing a balanced risk/reward.

OTHER INITIATIONS:

• Lehman Brothers initiated both AK Steel Holding Corp (NYSE: AKS) and Steel Dynamics Inc (NASDAQ: STLD) with Equal Weight ratings.

• Wachovia started Beazer Homes USA Inc (NYSE: BZH) with a Market Perform rating, saying the company has few discernible competitive advantages over other public homebuilders and lacks catalysts.

• Cowen initiated Rackable Systems Inc (NASDAQ: RACK) with a Neutral rating.

• Bear Stearns re-initiated Tiffany & Co (NYSE: TIF) with a Peer Perform rating.

• Leerink Swann started Align Technology (NASDAQ: ALGN) with an Outperform rating, with a range of $21-$23, believing the company's Invisalign technology is well positioned for renewed growth.

• Bernstein initiated Murphy Oil Corp (NYSE: MUR) with an Outperform rating.

• Cascade Financial Corp (NASDAQ: CASB) was initiated with a Hold rating and $19 target at Sandler.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: HSBC Holdings Plc (HBC), Suncor Energy Inc (SU) and Apple Inc (AAPL) topped today's list of downgrades:

• HSBC Holdings Plc (NYSE: HBC) was downgraded to Underweight from Neutral at JP Morgan, as the firm believes the loan loss from the U.S. mortgage business may be 20% worse than expected. They recommend investors to short HBC shares and use any rally to add short positions.
• Suncor Energy Inc (NYSE: SU) was downgraded to Underperform from Market Perform at Freidman Billings, citing fair valuation, higher capital costs and downside potential from crude oil prices.
• Apple Inc (NASDAQ: AAPL) was removed from Goldman Sachs' Conviction Buy List.

OTHER DOWNGRADES:

• Roche Holdings (OTC: RHHBY) was downgraded to Neutral from Buy at UBS.
• Pacer Int'l Inc (NASDAQ: PACR) was downgraded to Neutral from Outperform with a $33 target at Baird after the company's disappointing fourth-quarter report.
• Baird downgraded Host Hotels & Resorts (NYSE: HST) to Neutral from Outperform on valuation.
• Sina Corp (NASDAQ: SINA) was downgraded to Market Perform from Outperform at Piper Jaffray due to valuation after the company's solid quarter.
• JP Morgan downgraded AK Steel Holding Corp (NYSE: AKS) to Neutral from Overweight as they believe an acquisition of the company is not likely imminent given recent insider selling.
• Raymond James downgraded Time Warner Telecom Inc (NASDAQ: TWTC) to Outperform from Strong Buy.
• Oppenheimer downgraded FMC Corp (NYSE: FMC) to Neutral from Buy.
• AG Edwards downgraded Simon Property Group Inc (NYSE: SPG) to Hold from Buy on valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Sun Microsystems Inc (SUNW) and the Telecom Services Sector were the most notable stocks on today's list.

• First Albany upgraded shares of Sun Microsystems (NASDAQ: SUNW) to Buy from Neutral with a $7 target and has increased confidence that Sun can deliver on its 10%-plus operating margin following KKR's appointment to the Board.

• Morgan Stanley upgraded the Telecom Services sector to In Line from Cautious, citing a positive view on AT&T Inc (NYSE: T) and industry trends.

OTHER UPGRADES:

• Goldman Sachs added Occidental Petroleum Corp (NYSE: OXY) to its America's Conviction Buy List and upgraded shares to Buy from Neutral, citing valuation.

• Bear Stearns upgraded EMC Corp (NYSE: EMC) to Outperform from Peer Perform following its fourth-quarter report citing improved execution and a favorable demand environment.

• Longbow upgraded AK Steel Holding Corp (NYSE: AKS) to Neutral from Sell.

• Raymond James upgraded Brinker International Inc (NYSE: EAT) to Outperform from Neutral.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).