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Shares of United States Steel Corporation (NYSE:X) rallied on Tuesday to close higher by nearly 10%, despite the lack of positive news.

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X Chart

X data by YCharts

Broad Market Rally

One reason why United States Steel Corporation is moving higher is the rally in the broad market indices. United States Steel Corporation has a high beta of 2.4, so the stock is probably benefiting from the move higher in the Dow and S&P 500.

Sector Rally

The steel sector in general had a very good day Tuesday, and this likely helped United States Steel Corporation. As shown by the chart below, other steel stocks such as Nucor (NYSE:NUE), AK Steel (NYSE:AKS), Steel Dynamics (NASDAQ:STLD), and Arcelor Mittal (NYSE:MT) are all trading higher. However, United States Steel Corporation is outperforming these stocks by a slim margin.

X Chart

X data by YCharts

Short Covering

One possible explanation for the move in United States Steel Corporation is short covering. Short interest currently stands at roughly 37.8 million shares or 26.4% of the float. It is possible that some shorts have decided to lock in profits on their United States Steel Corporation short, as the stock is close to a 52-week low. However, it is possible that short covering continues to lead to higher prices over the short term.

Imports Threatening Pipe Market

Interestingly, United States Steel Corporation's CEO, John Surma, warned Tuesday about the 17% jump in steel imports into the U.S.

WTO Ruling

The World Trade Organization recently agreed with the U.S. that China has been breaking the rules when it comes to steel trade. This ruling could lead to a more level playing field - which would benefit steel companies, including United States Steel Corporation.

David Einhorn

Hedge fund manager David Einhorn outlined a negative case for United States Steel Corporation at the Ira Sohn charitable conference on May 16. Einhorn's primary reasons for being bearish are: United States Steel Corporation has lost money in 9 of the last 13 quarters, the company has three retirees for every current employee, and the company has exposure to a Chinese slowdown.

My Take

I would use the rally in United States Steel Corporation to rotate into better steel stocks such as Nucor . While United States Steel Corporation's valuation is compelling, just 0.77 times book value, the risk is too high. United States Steel Corporation has over $4 billion in debt, which could become difficult to service if steel prices do not improve. However, I would not be short United States Steel Corporation for a few reasons. Firstly, the short interest in United States Steel Corporation is already very high, so sentiment is already very negative for X. Additionally, if there is any turn in steel prices, United States Steel Corporation could see a major rally.

Source: United States Steel Corporation: What You Need To Know