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Bulls Wave off GM Fears...
Bulls Wave off GM Fears|
FOX News Business
Monday, June 01, 2009
Stock futures soared Monday morning as Wall Street looked to build on its best three-month performance since 1998 even as General Motors became the largest industrial bankruptcy in U.S. history.
As of 8:36 a.m. EDT, the Dow Jones Industrial Average futures rose 120 points, or 1.41%, to 8608, the Standard & Poor's 500 futures gained 16 points, or 1.74%, to 934.10 and the Nasdaq 100 futures jumped 18.75 points, or 1.29%, to 1454.
Wall Street was boosted early Monday by hopes of more clarity on the shaky U.S. economy from a trio of reports on personal spending, construction spending and manufacturing activity. At the same time, stock futures rallied around continued strength from commodities, as crude oil jumped for the fifth-straight session, and a global equities surge amid the weaker dollar.
The rally in the pre-market come after the Dow climbed nearly 100 points on Friday, capping off the best three-month performance in nearly a decade. The Dow has surged 30% since hitting a 12-year low on March 9 -- representing one of the strongest rallies from a bear-market low on record.
Stocks stayed strong after the Commerce Department said personal spending declined by 0.1% in April, improving on March's 0.3% decline and better than the 0.2% fall economists had forecasted. Incomes unexpectedly rose by 0.5% in April. At the same time, consumers continue to save rather than spend, with the U.S. savings rate jumping to its highest level since 1995.
GM Goes Bust
While the world awaited the Chapter 11 filing from GM (GM: 0.795, n.a., n.a.%), the markets weren't particularly worried by the fallout as it has been widely telegraphed for weeks. Some argue it's a bullish sign for the markets that Wall Street is unfazed by the failure of the American industrial icon.
GM filed for Chapter 11 protection at 8 a.m. EDT in the Southern District of New York, becoming the third-largest bankruptcy in U.S. history. The auto maker claimed total liabilities of $172.81 billion as of March 31, compared to $82.29 billion in assets.
GM's stock is expected to finally fall to near zero after having plunged to its lowest level since 1933 on Friday. The auto maker has said there is no role for common shareholders in the New GM, which will be spun off from the company's "bad" assets through a 363 sale. CEO Fritz Henderson is set to address reporters in New York later on Monday.
President Barack Obama is slated to address GM's restructuring at a press conference later in the day. The U.S. plans to inject another $30 billion into the company, bringing its total aid package to $50 billion. The markets' ability to wave off fears about GM's failure is a sharp contrast to last fall, when stocks routinely swung on the latest rumors of the Big Three's demise.
Commodities, Global Markets Rally
Meanwhile, shares of multinationals like Coca-Cola (KO: 49.1, n.a., n.a.%) were strong in pre-market trading, benefiting from the dollar tumbling to five-month lows.
The weakness for the greenback gave a further boost to red-hot commodities like crude oil, lifting energy stocks like ExxonMobil (XOM: 70.2, n.a., n.a.%).
Crude oil was on track to build on its four-day win streak. Amid signs of an economic recovery, crude oil surged 30% in May -- its best one-month rally since 1999. Crude, which is up each of the last four months, was recently up $1.68 per barrel, or 2.55%, to $67.99.
The tumble for the dollar came as Timothy Geithner made his first voyage to China as Treasury secretary in an effort to calm growing fears about the U.S. deficit. Geithner said China抯 dollar assets are 搗ery safe.?
Stocks are likely to be moved however by a slew of economic reports that the bulls hope will provide new evidence the U.S. economy is not just stabilizing but improving.
The rally began overseas as European and Asian markets soared by as much as 4%.
After the markets open, the government is set to release a new report on construction spending that could move home builders like KB Home (KBH: 14.97, 0, 0%) and Lennar (LEN: 9.47, n.a., n.a.%). Economists forecast spending slid by 1.8% in April.
Lastly, the Institute for Supply Management, a private-research group, is expected to say manufacturing activity in the U.S. tumbled 1.8% in May.
Chrysler's sale to a new company owned by the U.S., Canada, Italian auto maker Fiat and a UAW trust was approved Sunday by a bankruptcy court judge. The move allows Chrysler抯 揼ood assets?to emerge from bankruptcy at a faster rate than anticipated. The old company will remain in bankruptcy and liquidate.
Ford (F: 5.73, n.a., n.a.%) looks to capitalize on the failure of its two domestic rivals by ramping up production by about 10% from a year ago, The Wall Street Journal reported. The output boost comes as GM and Chrysler plan to shut their plans for almost the entire quarter.
Elan (ELN: 6.99, 0, 0%) saw its shares jump after the Journal reported the Irish biotech firm is in talks to sell a minority stake to Bristol-Myers Squibb (BMY: 19.94, n.a., n.a.%) and one other unnamed suitor. The potential deal could be a prelude to a full takeover of Elan, the paper reported.
Air France (AFLYY: undefined, undefined, undefined%) said a plan en route to Paris from Rio de Janeiro went missing overnight with 228 people on board. The airline said the plane was likely struck by lightning and suffered an electric failure while over the Atlantic Ocean.
Playboy Enterprises (PLA: 3.25, 0, 0%) is expected to tap Scott Flanders, CEO of Freedom Communications, as its next CEO as early as this week, the Journal reported.
European markets also added to their three-month rally. London's FTSE 100 rose 1.61%% to 4489.27, Germany's DAX gained 3.18% to 5098 and France's CAC 40 added 2.34% to 3354.35.
Asian stocks surged overnight. Japan's Nikkei 225 rallied 1.63% to 9677.75 and Hong Kong's Hang Seng closed up 3.95% to 1888.59