Grave GM outlook sinks markets

This is the do or die time for General Motors & the indications are they will not receive more gov support. The administration says that GM & Chrysler will have to overhaul their operations before receiving more assistance. Markets can figure out it's a little late for that, so they're selling off in a major way. Dow is down 277, decliners over advancers 9-1 & NAZ dropped 52.


Financial did not take this news well. The S&P 500 FINANCIALS INDEX suffered another major setback, after its recent recovery from the low of 82 on Mar 6.

Value 115.13

Change -7.99

% Change -6.5%

The major averages I follow were also hit hard on the GM news. The Alerian MLP Index & Dow Jones REIT Index each dropped 4+. The former, at 188, is below the important 190 resistance line. Junk bonds were weak while the VIX shot up 5 to the 45s.


The White House rejected the auto restructuring plans making more gov aid doubtful. The chairman of GM was fired, not really a major move in turning a battleship around. GM is replacing its board & will stress fuel efficient vehicles. Chrysler was told to form a partnership with Italian, Fiat. Confusion reigns, but the the outlook is bleak for the 2 autos. GM stock is down 25%, back into the 2s.

•Obama Says GM, Chrysler Get One Last Chance, Can't Become `Wards of State'


Gloomy auto news was enough to send oil below 50, first time in a week & the low end of its range.

CLK09.NYM

...Crude Oil May 09

...50.11

... 2.27 .......(4.3%)

Meanwhile, global leaders (G-20) are meeting in London to come out with tougher rules to regulate financials. They are focusing on hedge funds, an easy target these days. They will also try to come out with remedies for the worldwide financial mess & credit crisis. But any coordinated message will be limited given each country has its own agenda. Europe, in particular, will need more arm twisting to take tougher measures in helping economies recover.

•G-20 Targets Hedge Funds, Derivatives as Leaders Agree on More Regulation


Not much to do now but wait for the auto mess to get straightened out or end. The chart below shows Dow had been having a superb month, one of the best in history. But it fell off a cliff on Fri as it approached 8K. First 2 CEOs of major banks talked about Mar results coming in soft & today facing auto bankruptcies is too much for markets to handle.


Dow Jones Industrials --- 1 month