Business Politics and Current Affairs

November 18, 2010

GM – Economy Boost Up !

Filed under: Uncategorized — ispoli @ 9:20 pm

If there just two questions to ask today as the stock market enjoys a big rally, it’s these:

Will General Motors (GM) finish above $35? And can the Standard & Poor’s 500 Index ($INX) close above 1,200?

If the answer to both is yes, there’s a good chance that today’s rally will be more than a very pleasant one-day wonder.

The market opened higher and surged after GM shares opened above theirs $33 initial public offering price and the Federal Reserve Bank of Philadelphia offered a surprisingly robust view of manufacturing in the mid-Atlantic region. Worries eased substantially about financial problems in Europe.

At 3:46 p.m. ET, the Dow Jones industrials ($INDU) were up 173 points, or 1.6%, to 11,181. The S&P 500 was up 18 points, or 1.6%, to 1,197, and the Nasdaq Composite Index ($COMPX) jumped 40 points, or 1.6%, to 2,516.

We raise the two questions because a solidly higher opening day for the GM IPO would signal that there’s a body of investors who see the stock as a buy because they believe the company has good prospects, albeit with some challenges.

The S&P 500 faces a psychological barrier at 1,200. It topped 1,200 — barely — at 11 a.m. ET and has held a point or two below ever since. A close above 1,200 means the market’s overall support is stronger than thought.

GM CEO hopes the shares finish higher
CNBC’s Phil LeBeau asked GM CEO Dan Akerson this morning where he’d like to see the stock close. “Higher,” was his reply. So far he’s getting the “higher.”

 

The shares opened today at $35, but were at $34.05, up 3.2% at 3:46 p.m. ET.

 

What’s not clear is if this “higher” is high enough. The common wisdom was that a good day was an 8% to 10% gain.

GM sold 478 million shares of common stock at $33 late Wednesday. In addition, the company sold 87 million shares of preferred stock with a 4.75% dividend at $50 each. In all, GM sold $20.1 billion what is the largest U.S. IPO.

The total could top $23 billion if underwriters exercise options for an additional 71.7 million common shares and 13 million preferred shares.

 

The rally starts in Asia, moves around the globe
The market rally began in Japan and China and spread to Europe. The big catalyst to start was the ease in worries about European financial woes.

The European Union, the United Kingdom and others were trying to build a rescue package for Ireland’s troubled banks. The aim is to stabilize the situation and prevent the problems from affecting other countries, especially Portugal and Spain.

The hopes allowed the euro to rise against the dollar. That pushed the U.S. Dollar Index lower and set off rallies in gold, copper, silver and oil. The dollar index measures the greenback against a basket of six currencies. The euro represents 57% of the value of that basket.

Gold settled up $16.10 an ounce to $1,353. Copper was up 10.2 cents a pound to $3.831, and silver added $1.32 an ounce to $26.83.

Crude oil, meanwhile, settled up $1.41 a barrel to $88.85 in New York and was at $81.96 in electronic trading after hours.

The 10-year Treasury yield rose to 2.902% from 2.862% on Wednesday.

A broad rally with some losers
Not surprisingly, companies that benefit from a lower dollar saw their shares gain.

Freeport-McMoRan Copper & Gold (FCX) is the poster child for this performance. Shares were up 3.5% to $100.23.
Dow component Alcoa (AA) was up .37% to $13.41. CEO Klaus Kleinfeld told the Financial Times that his company expects global demand for the metal to grow 6.5% a year, doubling total consumption by 2020.

Caterpillar (CAT) was up 2.3% to $83; Boeing (BA) up 3.3% to $64.53.

Twenty-nine of the 30 stocks were higher, with Alcoa the leader and Intel (INTC) the one loser, down 0.7% to $20.93.

Eightly-seven Nasdaq-100 ($NDX.X) stocks were higher. The index was up 39 points, 1.8%, to 2,139. Apple (AAPL), up 2.5% to $308.11, contributed nearly 12 points to the gain. The company announced a European launch of its iAd mobile advertising network next month.

Stocks that were seeing big moves included:

  • NetApp (NTAP), up 7.6% to $52.97, tops among Nasdaq-100 stocks. The third-biggest seller of external computer-storage systems told analysts in a conference call Wednesday that it expects to gain market share and is considering share buybacks. The stock was also raised to a “buy” from a “hold” at Canaccord Genuity.
  • Limited Brands (LTD), up 4% to $33.15. The clothing retailer lifted its 2011 earnings-per-share estimate to a range of $1.82 to $1.97. Analysts had expected earnings of $1.94. The company also declared a $3-a-share special dividend and authorized a $200 million share repurchase program.
  • DryShips (DRYS), up 8.7% to $5.64. The Greek owner of deep-water drilling rigs and vessels that haul iron ore and coal reported that third-quarter profit rose 57% as revenue from drilling rigs gained.
  • Sears Holdings (SHLD), down 4.2% to $62.86, the biggest loser among S&P 500 stocks. The largest U.S. department-store chain said its third-quarter loss widened as consumers remained cautious given high jobless rates. Excluding one-time items, the loss was $1.71 a share, wider than the Street estimate of $1.11 a share.
  • Williams-Sonoma (WSM), down 9.8% to $32.28. The gourmet-cookware retailer forecast fourth-quarter revenue may rise as little as 3%. Analysts had estimated a 5% increase.

Some decent economic news
The really bullish economic news was the Philadelphia Fed’s manufacturing report. The index surged in November, hitting 22.5 after October’s level of 1. According to Briefing.com, economists had expected a reading of 5.

Meanwhile, the Labor Department said the number of new people seeking unemployment benefits rose by 2,000 to 439,000 during the week ended Nov. 13, fewer than the 7,000 additional claims economists had expected.

The Conference Board said its gauge of October leading indicators rose 0.5% after similar growth in September. The increase was below the 0.6% increase economists had forecast.

Thankx msnbc

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