Monday’s Market Recap: Financials Led Market Today

The markets had a volatile day, as the Dow Jones (^DJI) closed - 0.32%.  The NASDAQ (^IXIC) and the S&P 500 (^GSPC) were up slightly today, as they closed the day at 1653.31 and 858.73 respectively.  The price of the 10-year was up today as the Fed increased its debt purchasing, with the yield closing at 2.86%.  Oil was down today with concerns about demand in the marketplace, settling at $50.05.  June gold contracts were up today settling $895.80, as investors try to find a safe play in the market.

Leading the Dow in its downward slide today, GM (GM) shares fell over -16% today, with shares down over -45% so far this year.  This slide was on news that GM is preparing for bankruptcy despite GM officials stating that they hope to weather the economic downturn without filing for bankruptcy.  It is reported that officials on President Obama’s automotive task force and officials at GM are in constant communication so that if needed the bankruptcy proceedings would be fast and “surgical”.  These procedures are being prepared because they want to have a safety net if GM’s plan to exchange $28 billion in debt for equity in GM gets approved by the United Automobile Workers union.  Plans entail that GM would enter bankruptcy protection for less than a month and then reemerge a better more financially solvent company.

Financials led the market today, benefited by good news concerning Citi (C) and Goldman Sachs (GS).  Citi was up 25% as it was reported that the company plans on selling Nikko Citigroup Ltd. in addition to Nikko Cordial Securities Inc. and Nikko Asset Management Co.  Citi, who will announce earnings later this week, has been hit hard with their share price falling from over $30 to $3 in a twelve month period.  To bolster their stock Citi has been forced to sell off valuable assets in an effort to strengthen their books because of the hard economic times and its effect on their bottom line.  In other financial news, Goldman was up over 4% as it announced that it had raised about $5.5 billion to create a fund to buy discounted private-equity holdings.  Goldman has also announced plans to raise $5 billion in a stock sale to generate money to repay TARP funds.  Goldman is required to take stress test by the government because they received TARP funds, and the company feels that there have been increased oversights by the government and are looking into repaying the money because of these “new” rules.  Goldman was also was given a buy rating by Citigroup Global Markets given investors confidence to buy into the company.

In tech news today Yahoo (YHOO) was up over 6% on news that they were teaming up with Microsoft (MSFT) in online-advertising.  Yahoo will be in charge of sales for companies’ display advertising, and Microsoft will be in charge of search advertising.  This collaboration between Yahoo and Microsoft is an attempt to steal advertising from market leader Google (GOOG).  This collaboration was expected last year when Microsoft tried to buy Yahoo, but this collaborative effort seems to be the result.  Yahoo and Microsoft have trailed Google greatly in search and are both are hoping that this new effort will be successful in stealing market share from Google.

Disclosure: The fund the author is associated with is long GS and GOOG.

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