Stocks Lose Confidence; GM Below $1

Stocks wobbled Friday as investors were encouraged by a jump in consumer sentiment less-bad GDP report but still remained a bit jittery. Dell shot out of the gate after beating its earnings target but other techs were slow to follow.

After the closing bell on Thursday, tech giant Dell reported its earnings tumbled 63 percent but narrowly beat analysts' expectations, helped by cost-cutting measures.

Consumer sentiment improved in May to its highest level since last September as expectations for the future surged but worries about current conditions persisted. The Reuters/University of Michigan gauge of consumer sentiment rose to 68.7 in the final reading for May, higher than the 67.9 recorded mid-month and final April reading of 65.1.

The U.S. economy contracted at a 5.7 percent annual rate, a slightly slower pace than first reported, in the first quarter. In the initial estimate last month, economic contraction was reported at a 6.1-percent pace. However, it wasn't quite as good an improvement as economists had expected and worries about consumer spending persisted.

Corporate profits rebounded, hinting that the recession may be moderating.

However, the Chicago PMI, a measure of midwest manufacturing, slipped to 34.9 from 40.1, below the consensus of 42 and an anamoly as many manufacturing gauges have shown improvement.

"We are inclined to view the weakness in the Chicago survey as likely being due to the disproportionate influence of the auto sector in the region, so we still expect to see a further gain when the national ISM report is released next Monday," Ian Shepherdson, chief U.S. Economist at High Frequency Economics, wrote in a note to clients.

General Motors shares fell below the symbolic $1 level as the June 1 deadline looms and bankruptcy seems imminent. A senior administration official said a GM bankruptcy would likely take at least 60 to 90 days — perhaps longer — to complete.

Auto-parts maker Delphi may soon emerge from Chapter 11 bankruptcy protection, the New York Times reported. This comes a day after Ford's largest supplier, Visteon, filed for Chapter 11 bankruptcy protection for its U.S. operations.

 

Oil prices topped $66 a barrel, near six-month highs, buoyed by hopes of an economic recovery.

The dollar fell to a five-month low against a basket of currencies, despite a series of successful Treasurys auctions, on news that South Korea's Pension Service (NPS) would reduce exposure to U.S. government bonds and stocks in its five-year portfolio, Reuters reported.

Banks stocks opened mixed, with Bank of America and Citigroup higher, and JPMorgan and Wells Fargo lower.

A group of banks and money managers plan to release a letter to the Federal Reserve Bank of New York to help fend off some rules proposed by the Obama administration that seek to control trading in the derivatives market, the Wall Street Journal reported.

Among the biggest early movers in the market was Office Depot , which jumped more than 10 percent after JPMorgan upgraded the stock to "overweight."

Tiffany shares slipped after the upscale jeweler reported its profit tumbled 62 percent but hit analysts' target.

Asian and European stocks gained on Friday, boosted mainly by the basic resource sector after a report showed Japan's factory output rose 5.2 percent in April, helped by an increase copper and gold prices.

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