General Motors fuels rally in US Market

Bear Sterns adds further fuel to this rally on news of selling its minority stake

General Motors and Bear Sterns pulled up US stocks considerably today, Wednesday, 26 September, 2007. Market traded in positive territory for entire day but indices shot up in the final hour of trading on news from both companies. All ten economic sectors ended the day in positive territory, with consumer discretionary, consumer staples and materials registering the largest gains.

The Dow Jones industrial Average closed higher by 99.6 points at 13,878.15. The Nasdaq Composite Index, finished higher by 15.88 points at 2,699.03. S&P 500 finished higher by 8.21 points at 1,525.42.

Twenty-five out of thirty Dow stocks ended in green today. General Motors and Alcoa were the top two Dow winners. Boeing and H-P featured among the top two Dow laggards.

General Motors and the United Auto Workers union reached a tentative labor agreement. The GM and UAW agreement included the creation of an independent trust that will take over $50 billion in retiree health insurance obligations. The deal reportedly also includes an important provision on second tier wages for some incoming employees. GM shares closed up by 9.01%.

On the Bear Sterns front, The New York Times reported that the company is interested in selling its minority stake. There is also speculation that Warren Buffett, Bank of America and Wachovia are potentially interested in acquiring the minority stake. This gave a huge push to the financial sector and also the overall market. Shares of Bear Sterns shot up 11% on this report.

Durable goods orders fall 4.9% in August

When market opened in the morning, indices were trading in the green. But financials continued to trail a bit behind with respect to other sectors. Some weakness in the banking group, was acting as the main limiting factor.

The Commerce Department reported that orders for durable goods fell 4.9% in August, indicating growing concerns that business spending might not be strong enough. Orders fell in August after a 6.1% gain in July; the drop was the biggest monthly decline since January.

But market did not react negatively to this news. The General Motors news was the biggest source of support today, but the pullback in energy prices was also helping.

But ninety minutes before the closing bell was to ring, the Bear Sterns bomb exploded in the market. Financial stocks got a big boost from this and overall market sentiment improved further taking Dow as high as 132 points.

Surprisingly, among Indian ADRs, barring Rediff.com and WNS Holdings, all closed in the green. Rediff shares lost 4.2% today but Rediff was the top gainer in the last two days. MTNL and VSNl were the two top gainers today gaining 4.8% and 4.25 respectively.

Crude supplies gains for the first time in five weeks

Crude oil prices initially fell today after the Energy Department’s weekly inventory report but then erased earlier losses and closed higher for the day. This was crude’s first gain in four days. Crude-oil futures for light sweet crude for November delivery closed at $80.3/barrel (higher by $0.77/barrel or 0.9%) on the New York Mercantile Exchange. Prices are up 32% from a year earlier.

As per this week’s inventory report by the Energy Dept, crude supplies rose 1.8 million barrels to 320.6 million for the week ended 21September (against an expected decline of 2.15 million barrels). Crude inventories are 3.5% lower than year-ago levels. U.S. stockpiles had fallen by a total of 18.3 million barrels in the previous four weeks. This was first gain in last five weeks.

Trading volume came to nearly 1.3 billion on the New York Stock Exchange, with advancing stocks topping decliners roughly 2 to 1. On the Nasdaq, volume topped 2 billion shares, and advancing stocks outran decliners by more than 4 to 3.

For tomorrow, several economic reports will be released. The final revision to the second quarter Gross Domestic Product will provide an official assessment of economic growth in the latest quarter. The weekly Jobless Claims and the latest figures from the New Home Sales trends will also hit the wires.