Cleveland-Cliffs (CLF) stock tumbled 5.07% in pre-market trading on Tuesday following a downgrade from Wells Fargo. The investment bank cut its rating on the steelmaker to "underweight" from "equal weight", while maintaining its price target at $11.

Wells Fargo analyst Timna Tanners expressed skepticism about Cleveland-Cliffs' recent share price movements, stating, "The share move looks to us like an overreaction to an MOU with a foreign steel mill and potential rare earth deposits." Tanners added that the brokerage remains skeptical of attractive returns from the region, citing a lack of information provided by the company on other deposits.

The downgrade comes despite Cleveland-Cliffs reporting a narrower third-quarter loss than Wall Street estimates earlier this week. The company's recent focus on rare earth production potential and its memorandum of understanding with a foreign steel mill had previously driven positive sentiment. However, Wells Fargo's cautious stance has dampened investor enthusiasm, leading to the significant pre-market decline. This movement highlights the impact of analyst ratings on stock performance, especially in the volatile materials sector.