Late evening reports that President Obama has concluded bankruptcy for GM is the most likely course of action (apparently leaked by Congressional members) was no surprise to most traders in GM and analysts, who had come to that conclusion on Monday.
The tipoff was when the Obama administration indicated they would guarantee the warranties of cars sold by GM and Chrysler; there was no reason to do this if bankruptcy was not an option. Still, it is certainly a political surprise coming from a man who was elected with strong union support.
1) Futures dropped about 5 points on the ADP jobs report, which indicated that the private sector shed 742,000 jobs in March, more than consensus of a decline of 663,000, while February was revised downward by an additional 9,000 jobs.
2) The Financial Accounting Standards Board (FASB) begins debate on mark-to-market accounting today, and will vote on any changes tomorrow.
Remember, while the FASB is a private organization, the SEC has designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S., so this vote does matter.
2) Even though mortgage rates continue to fall (4.61 percent for a 30-year fixed rate mortage), and refinancing activity is strong, applications for a mortgage to purchase a home are not rising significantly--up only 0.1 percent from the week before, according to the MBA.
3) Auto sales company Sonic Automotive, the nation's third-largest auto dealer, reported a loss of $16.43 (!) on continuing operations for the quarter just ended, and said it will not issue 2009 earnings guidance. They are focusing on used vehicles and on parts and service.
More importantly, their auditors have expressed doubt about their ability to continue as a going concern. The company said that it "may be unable to avoid filing for bankruptcy" if it is not able to restructure its debt or receive further financing.
4) Honda announced it will reduce North America production by another 62,000 vehicles. Additionally, it will cut the pay of its salaried employees while forcing its hourly workers to take six unpaid days of leave.
5) Despite a 15.3% drop in same-store sales at its superstores, bookseller Borders' analysts' estimates. While book same-store sales fell nearly 12%, comp-store sales of DVDs, CDs, and other "non-book" merchandise plunged 21% in the quarter.
6) An IPO (maybe)! Rosetta Stone has filed an amended S-1 to 6.25 million shares, to be priced (hopefully) in the $15-$17 range.
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