Markets rise on GM bankruptcy

The well advertised General Motor's bankruptcy is bringing back buyers to stocks in a big way. Dow gained 204, advancers over decliner 6-1 & NAZ was up 49. As predicted, GM's days in the Dow were limited. Today, GM & Citigroup (C) were replaced with Travelers (TRV) & Cisco (CSCO), one financial & a tech company was substituted for an ailing motor company. TRV is up 1.75 & CSCO up .90, helped by Dow ETF funds buying the stocks to update their portfolios.

•GM, Citigroup Booted From Dow Jones Industrials; Travelers, Cisco Join 30

Being leaders, banks are doing quite well, although I would have expected they would be doing better given all the stock buying today:


S&P 500 FINANCIALS INDEX

Value 168.00

Change 3.56

% Change 2.2%

The high yield sector is rising along with other stocks. The Alerian MLP Index is up 4 to 231, another interim high (helped by higher oil prices). REITs & junk bond funds are also attracting buyers. When their prices go up the related yields decline, having the effect of narrowing their spread over Treasury yields (which are rising). This relationship can not last.

Speaking of rising markets, commodities are also strong. Oil leads the way reaching another interim high:

CLN09.NYM

...Crude Oil Jul 09

...67.54

... 1.23 .......(1.8%)

There's not all good news in this rising market. Treasuries sank, the first time in 3 days. The yield on the 10 year Treasury rose an enormous 18 basis points to 3.65% on fears about increased economic activity. The Treasury bond yield has risen 162 basis points since reaching the record 2.03% earlier this year. The difference between 2 & 10-year yields widened to 267 basis pints, approaching the record 276 reached last week. Inflation fears are priced into the long bond but have only a minimal influence on the shorter term notes.

•Treasuries Slide as Advance in Stocks, Oil Damp Haven Appeal of U.S. Debt


Markets are not disturbed by GM's bankruptcy & encouraged by reports of rising manufacturing activity. Dow is shooting for 8776, its starting point in 2009. For time being, caution is being thrown to the wind. That always worries me.


Dow Jones Industrials --- 3 months