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.

The Wall Street Report: The Weekend Edition

Springtime for Stocks: Rally May Finally Beat Down Bear

The bear may finally be beaten.

As investors digested this week's flurry of good news—or at least better-than-bad news—talk grew that the long slog through the debilitating bear market could be over.

"The world is not going to zero," Nadav Baum, managing director of investments at BPU Investment Management in Pittsburgh, says of investor sentiment these days. "Things seem to be getting better. Deals are getting done and people have more swagger in their step. So maybe we are coming out of something."

The markets kicked off the second quarter in the face of a series of positive developments that sent stocks soaring in Thursday trade.

Consider:

Mark-to-market accounting rules, the long-despised bogeyman keeping banks' toxic assets from being sold, were altered substantially, kickstarting the Wall Street rally.

The Group of 20 world economic summit yielded a $20 billion pledge to resuscitate the global economy.

Auto sales numbers, while still dauntingly low, beat expectations and analysts foresee more lending to get the sales pace accelerated.

Add some stabilizing in housing numbers and improvement in investor sentiment to the mix and you had both technicians and analysts of fundamentals cheering on the surge that has welcomed in the second quarter.

Market pros consider this a strong buying opportunity, with banks, materials and technology the main sectors to pull the market out of its malaise.

"This is a really big moment," says Uri Landesman, head of global growth strategies at ING Investment Management in New York. "The real question in my mind is if we are dragging the floor up."

The Standard & Poor's 500 put in an intraday floor of 666 on March 6, and Landesman now sees the market gradually setting higher lows, which he says is a building process towards a bull market.

On the other end, traders were watching 840 as a possible new resistance level that the market hit but did not exceed Thursday. Breaking through that and then past 845 would be seen also as strongly bullish trends.

"If they go through that I think they'll catch a lot of shorts flat-footed and it will overtrade on itself," Art Cashin, director of floor operations at UBS, told CNBC (see video). "But I think the bottoming process looks very healthy here and we'll see if they do pull back to retest anything."

Whether the latest effort at recovery takes a perfect "V" shape is up for debate.

Unemployment appears to be posing the strongest headwind to the market now, and first-quarter earnings also will pose a significant challenge to investor sentiment.

The changes to mark-to-market accounting left some uncertainty as to what impact they will have on the earnings reports that will kick off next week, with most expecting the greatest impact to come in the second quarter numbers released over the summer.

"We're going to go through a very rough earnings period now," Landesman says. "I don't know one month from now if we're going to be higher than we are today. But I think once you get first-quarter earnings out of the way we could be poised for a pretty good move."

The accounting rules changes received most of the credit for Thursday's rally.

Banks have been hampered from lending because the distressed assets were impairing capital ratios, but the new rules are directed at that problem and were widely expected to goose lending across the financial industry.

"This is kind of like the gum that's been holding up the dam," says Gary Hager, president of Integrated Wealth Management in Edison, N.J. "When they peel this rule back and say that the toxic or Level 3 assets can be moved back to either off the balance sheet or quoted at a reasonable valuation to their timeline ... all hell is going to break loose on the upside."

Using the Fibonacci numbers sequence to predict stock movements, Hager says 8,330 and 9,313 will be critical resistance levels for the Dow, with 10,220 seen as a breakthrough that will firmly establish the potential to challenge the historic high of 14,164 on Oct. 9, 2007.

In the meantime, though, he says policy makers are on the right track to getting the market back to health. Thwarting short-sellers by reinstituting a rule that prevents shorting stocks unless it is after an up move would complete the picture, Hager says.

"If they could add one thing more to this cake they're baking, it would be the uptick rule," he says. "If they come off that uptick rule it's off to the races."
If there is any other wariness over the rally it stems from inflationary concerns--that in priming the pump with trillions of printed money the government may overshoot and create more problems down the line.

Read more here .

Analysts mull replacements if GM leaves Dow
Goldman, Cisco are among candidates to replace troubled automaker

By Kate Gibson, MarketWatch


NEW YORK (MarketWatch) -- With General Motors Corp. possibly headed into government-sponsored bankruptcy, the automaker's standing as one of 30 members of an exclusive club -- Dow Jones Industrial Average -- is now viewed as shaky.

Goldman Sachs Group Inc. (GS 119.48, +5.26, +4.6%) is among the picks of analysts weighing in on likely replacements.

General Motors ( GM 2.10, +0.01, +0.5%) and another Dow component, Citigroup Inc. (C 2.85, +0.11, +4.0%) , were days ago dropped from Dow's global stock index. News Corp. (NWS 8.79, +0.25, +2.9%) , the owner of the index as well as of MarketWatch, citied market conditions for their ouster.

Pulling a company from the global index is often a "trial balloon" for an eventual ousting from the Dow industrials, said Doug Roberts, chief investment strategist for Channel Capital Research .

Read the rest here .


Earnings will test the rally

SAN FRANCISCO (MarketWatch) -- April is the cruelest month, the poet T.S. Eliot once wrote, and stock market investors are hoping next week won't live up to that epitaph and dash the hopes of those who believe the current uptrend will continue.

Next week isn't the first full trading week of the month -- markets will be closed on Friday in observance of Good Friday -- but it will bring the official kickoff of what will likely be a grim first-quarter earnings season. It will also bring trade data and the minutes of the U.S. Federal Open Market Committee's March policy meeting, which could provide more clues about whether a bottom for the U.S. economic downturn is anywhere on the horizon.

The earnings reports "will be a real test to see if the current rally is just a technical rally within the overall context of an ongoing bear market or the first leg of a new bull market," said Frederic Dickson, chief market strategist, Davidson Companies.

The Dow ended above 8,000 for the first time since Feb. 9, but it's the broader S&P 500 that many market analysts are watching for a turnaround signal.

"Any close above 850 for the S&P 500 next week, then it's would be safe to say the bear market has ended, and we can work our way higher," said Peter Cardillo, chief market economist at Avalon Partners. (Click here to read the rest of this story.)

The Wall Street Report: GM CEO Rick Wagoner Is Out

Chrysler's Viability Assessment[pdf]
GM's Viability Assessment[pdf]
Auto Restructuring Fact Sheet[pdf]
Warranty Commitment Program[pdf]

GM CEO Rick Wagoner Is Ousted By the United States Government

The fall of General Motors Chairman and Chief Executive Officer Rick Wagoner was unavoidable. There is no way President Obama could hand out more billions to a management with a practically unblemished record of failure.


Yes, it's certainly good news; the Wagoner management was never going to turn around General Motors (nyse: GM - news - people ). Never. After all, Wagoner has been chief executive since 2000 and head of North American auto operations six more years before that. His predecessor and mentor, Jack Smith, became chief in 1992. GM lost market share in the U.S. in all but a couple of those years. The losses in Wagoner's last four years topped $80 billion.


Worse, GM seemed adrift in this crisis. Its European operations--and they are key to saving GM--seem to be without serious direction. In the U.S. we hear mostly of program cancellations, and the Vice Chairman Robert Lutz, Please click here to read the rest of this story.

As expected, the Markets took a huge jump of a cliff, over the news of the firing General Motors (GM) CEO Rick Wagoner, and the banks financial situation. The Dow fell 254.16 (-3.27%) at 7522.02 ; and Nasdaq dropped 43.40 (-2.81%) to 1501.80 .