US Stocks Decline On Doubts Over Stimulus Plan, Auto Bailout

The markets started the week down, with the Dow closing -3.27% lower.  The NASDAQ and the S&P 500 were both down on the day closing at 1501.80 and 787.53 respectively.  The 10-year price was up today with yields closing at 2.712%.  Both oil and gold contracts were down today with oil settling at $48.41 and gold at $917.70.

The markets were down today on news that the government had rejected GM’s (GM) and Chrysler’s restructuring plan.  Share prices fell over -25% as a result of the poor news.  Obama said in a press conference that the Treasury will provide working capital for the next 60 days as GM puts together a new restructuring plan.  The government also indicated that bankruptcy might be the best restructuring plan for these companies.  GM has fallen over -30% year to date and is well below their 52-week high of $24.24.  As a result of this news, car manufacturers Toyota (TM), Honda (HMC), and Ford (F) were severely affected all losing over -2.5%.  Auto parts and equipment makers also were affected by the news as Pep Boys (PBY) and Auto Zone (AZO) were both down.  GM hopes that it can avoid bankruptcy and restructure the company so that they will be able to compete with the more financially sound car companies.

Consumer retail stocks declined today with doubts about the stimulus package and GM swirling around.  Consumer retail giant Target (TGT) dropped over -2.5% today.  The number two US discount retailer has been struggling in the down economy and plans to only open 75 new stores this year, compared to 114 in 2008.  The slowdown has made Target more price conscious and less focused on style.  Target has begun to follow the lead of Wal-Mart, (WMT) who focuses mainly on price, by gearing their spring advertising campaign to low prices on food, household, and healthcare items.  Target has most recently suffered from a pre-tax loss of $135 million from its credit card segment.  This does not bode well for the company, especially while trying to compete with Wal-Mart.  Target’s aim to be Wal-Mart seems to be falling short.

Today in tech news, IBM (IBM) published the “Open Cloud Manifesto” which hopes to set rules for cloud computing.  AT&T (T) and Cisco (CSCO) have signed the manifesto in an effort to make the playing field equal.  Amazon (AMZN), Microsoft (MSFT), and Google (GOOG) have not signed the document and do not have plans of doing so in the future.  Amazon said that the best way to show that you are for customer flexibility is providing it, not signing a document that says you will.  These companies all agree that the manifesto has valid points, but are unwilling to commit to signing a manifesto in an area which will prove to be very important for these companies futures.

Disclosure: The fund the author is associated with is long WMT, IBM, CSCO, and GOOG.

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