The Wall Street Report: GM In Process Of Bankruptcy ?

The Bulls Are Baaaaack !!!

The markets gave back a chunk of last week’s big gains on Tuesday as Wall Street braces for the ugly corporate reality likely to be exposed by the start of earnings season.

Today's Markets

The Dow Jones Industrial Average (.INDU) lost 186.29 points, or 2.34%, to 7789.56, the S&P 500 fell 19.93 points, or 2.39%, to 815.55 and the Nasdaq Composite (.IXIC) slid 45.10 points, or 2.81%, to 1561.61. The consumer-friendly FOX 50 dropped 13.10 points, or 2.22%, to 615.03.

The triple-digit selloff adds to Monday’s minor losses and comes amid new signs of a potential bankruptcy for General Motors (GM: 2, -0.25, -11.11%) and worries about earnings season, which is set to kick off Tuesday evening with results from aluminum titan Alcoa (AA: 7.82, -0.09, -1.14%).

“The hopes and wishes rally seen over the past month will be met with the reality of earnings season and we'll see what dreams come true and which get scorched. Earnings will be ugly but commentary about [the second quarter] will be most relevant,” Peter Boockvar, equity analyst at Miller Tabak, wrote in a note.

Few were surprised with the pullback as Wall Street had been in the midst of one of its strongest stretches on record. Thanks to newfound economic optimism and more confidence in government actions, the Dow last week capped off its best four-week win streak since 1933.

“We have come far fast and with little to fundamentally support the move. I don't want to sound too negative -- I am not,” Peter Kenny, managing director at Knight Capital Group, wrote in a note. “If we give back [some gains], look for the market to show some resilience. Dips will likely be bought.”

On a technical basis, Kenny said he expects the S&P to be resilient near the 770-800 level.

Citigroup (C: 2.76, 0.04, 1.47%) and Microsoft (MSFT: 18.76, 0, 0%) were the only two of the Dow's 30 components that made headway Tuesday. The biggest percentage losers on the benchmark index included GM, General Electric (GE: 10.6309, -0.5191, -4.66%) and Caterpillar (CAT: 29.43, -1.84, -5.88%).

The vast majority of the Nasdaq 100's members also closed lower, led by steep drops for tech stocks like BlackBerry maker Research in Motion (RIMM: 59.95, -4, -6.25%) and Dell (DELL: 9.83, -0.5, -4.84%). The sector remains rattled by the apparent collapse of IBM's (IBM: 98.67, -2.85, -2.81%) takeover of Sun Microsystems (JAVA: 6.28, -0.3, -4.56%).

Tuesday's dive erased the majority of last week's rally and bolsters the case by some that Wall Street's recent surge was overdone to the upside.

“I think we’re going to retest the lows. Historically that’s what you do. There is this rush to believe the worst is behind us and that may well be true but the bottoming process can be very difficult and painful,” Tony Dwyer, equity market strategist at FTN Equity Capital, told FOX Business.

'Sell-and-See' Approach to Earnings

Traders clearly weren't waiting around on the hopes companies will sound upbeat tones in their earnings reports in the midst of the deepest recession since World War II.

While the focus will be on companies' second-quarter and full-year forecasts, analysts expect first-quarter earnings to have declined 37% from the year before. A decline in earnings would mark the seventh-straight contracting quarter, the longest such streak since the Great Depression, according to Bloomberg.

Alcoa, the largest U.S. mining and aluminum company, is expected to report a loss of 57 cents per share, potentially kicking off earnings season on a bleak note. In addition to Alcoa, earnings were expected Tuesday evening from Bed Bath & Beyond (BBBY: 25.51, -0.86, -3.26%), Mosaic (MOS: 42.96, -1.91, -4.26%) and Ruby Tuesday (RT: 3.84, -0.21, -5.19%).

GM, Energy Drag on Markets

Energy stocks such as BP (BP: 39.58, -1.08, -2.66%) and ExxonMobil (XOM: 68.66, -1.32, -1.89%) were some of the biggest weights on the market Tuesday as crude oil ended in the red for the third straight day. Crude slid $1.90 per barrel, or 3.72%, to $49.15. On the other hand, gold headed higher, rising $10.70 per ounce, or 1.23%, to $882.20.

Financial stocks were also under some pressure Tuesday as banks like Morgan Stanley (MS: 23.21, -0.122, -0.52%) and State Street (STT: 32.16, -0.83, -2.52%) tumbled on new worries about banks’ toxic assets. The International Monetary Fund is expected to say toxic debts owned by banks and insurers could jump to $4 trillion, including $3.1 trillion in the U.S. alone, British paper The Times reported.

Meanwhile, the markets were provided with another reminder of the precarious state of the U.S. auto industry as Bloomberg News reported General Motors (GM: 2, -0.25, -11.11%) is speeding up preparations for a possible bankruptcy filing. The auto maker is reportedly considering a “363 sale” under the bankruptcy code that would allow it to create a new company from the assets and brands of GM.

Corporate Movers

American International Group's (AIG: 1.05, -0.06, -5.41%) asset management business has drawn interest from about a half-dozen bidders but the bailed-out insurer may have to sell it for a discount due to client withdrawals and declines in asset prices, The Wall Street Journal reported. Potential buyers, which include several private-equity firms, have offered between $400 million and $800 million, the newspaper reported.

Sun Microsystems (JAVA: 6.28, -0.3, -4.56%) CEO Jonathan Schwartz’s job could be in jeopardy if his company’s deal with IBM (IBM: 98.67, -2.85, -2.81%) is not revived, the Journal reported. Schwartz favored the IBM offer but a board faction led by Sun chairman and co-founder Scott McNealy opposed it, the newspaper reported. Talks have reportedly broken down amid pricing and regulatory concerns.

Royal Bank of Scotland (RBS: 7.7182, -1.1818, -13.28%) said the U.K. government’s stake in the lender will rise to 70.3%, up from 58%, due to a failed effort to raise money in the private sector. RBS also said it is in talks with unions about cutting as many as 9,000 back-office jobs over the next two years.

Blockbuster (BBI: 0.78, -0.0999, -11.35%) saw its shares dive a day after the movie rental chain warned its auditors believe the risk of not restructuring its credit facilities raises “substantial doubt” about its ability to continue as a going concern.

Brinker International (EAT: 16.8501, 0.6001, 3.69%), the parent of Chili’s Grill & Bar, forecasted a better-than-expected adjusted-quarterly profit of 44 cents to 45 cents per share.

World Markets

European indexes ended in the red as London's FTSE 100 sank 1.58% to 3930.52, Germany's DAX slipped 0.63% to 4322.50 and Paris' CAC 40 fell 0.94% to 2902.31 .

In Asia, Japan's Nikkei 225 fell 0.28% to 8832.85 and Hong Kong's Hang Seng tumbled 0.46% to 14928.97. China's Shanghai Stock Exchange saw its benchmark index, the Shanghai Composite, rise 0.8% to 2439.18 after being closed on Monday.



GM Could File for Bankruptcy, Reports Say
Kathryn Elizabeth Tuggle
FOXBusiness

General Motors Corp. (GM: 2.049, -0.201, -8.93%) could be moving more quickly toward bankruptcy, according to numerous reports that cite individuals familiar with the matter.

A possible bankruptcy would be hastened in spite of company directors who are seeking to explore savings to aid the company in the months to come, the reports said. Those funds could potentially be used to finance a bankruptcy.

GM’s new CEO, Fritz Henderson, took over the company after former CEO Rick Wagoner was replaced by the President’s Administration last week. Henderson appeared on NBC’s discussion program, “Meet the Press” on Sunday and said that bankruptcy was not inevitable for GM, but was possible.

“We are planning to get the job done. Our preference is to do it outside of a bankruptcy process, but it would only be prudent to make sure that we're planning for if we need to resort to that, that we can move and we can move fast,” Henderson said in the interview, according to a transcript released by NBC.

GM has been infused with roughly $13 billion in government bailout funds over the last 12 months, and has requested another $16 billion for its complete recovery.

“As I look at the situation, we need to accomplish a set of goals, and accomplishing those is -- can't be compromised. So if it can't be done outside of a bankruptcy process, it will be done within it,” Henderson said in the interview.

“Our worry is -- how do we get General Motors going forward? And that's where we're going to spend 100% of our time,” he added.