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Still On The Lookout For That Bear

So, is it time for the retracement to begin? The S&P 500 has rallied from 666 March 6th to about 830, a gain of almost 25 percent. That is quite a rally, but most of the Street believes it is a bear market rally.

With two days left in March, the S&P is up 11 percent this month, it's best one-month showing since 1991.

Hong Kong and Tokyo both down nearly 5 percent today.

Bank shares are lower, as Spain unveiled a plan to rescue one of its banks, Caja Castilla la Mancha, which is taking big hits from the falling property market.

Commodity stocks are down mid single-digits.

Elsewhere:

1) The day of reckoning for Chrysler and GM is fast approaching. The Street believes that Chrysler will almost certainly go into bankruptcy.

General Motors' CEO Rick Waggoner is gone, and the Board is being replaced, but that will not do it for GM.

Merrill Lynch analyst John Murphy headlined his note this morning, "Change at the Top is Not Enough," concluding that "we don't believe the change will provide a quick fix for the huge structural problems plaguing GM. These will likely only be solved by a bankruptcy judge and new management perspective such as that of Alan Mulally."

GM and Chrysler have two problems that overshadow all others: the debt burden and its labor costs. According to Merill Lynch, the debt burden including commitments is about $62 billion. In the most optimistic scenario, a cramdown would reduce that to $33 billion.

Here's where it gets painful: the government loans to GM will exceed $30 billion, so the total debt burden is back to about $65 billion. And that's if the cramdown is successful.

All the pieces are in place for bankruptcy: aid to auto parts suppliers, backing up of warranties.

GM down 20 percent, Lear down 12 percent, American Axle down 9 percent, Johnson Controls down 4 percent pre-open.

2) UBS down 5% after German newspaper Die Tageszeitung reports that the Swiss bank could write down another 1.5 billion euros in credit-linked obligations and lay off another 8,000 workers.

3) Citigroup is reportedly now accepting formal offers for its Japanese brokerage firm, Nikko Cordial. The Financial Times reports that a sale of the Japanese brokerage unit could generate $5 billion to $9 billion for Citigroup, which hopes to finalize a deal in a month's time.

4) Are we bottoming? General Electric's (our parent company) head of GE International, Nani Beccalli, told the FT that he was the first "glimmers of hope" in the global economy. He cited an improving retail sector and improving bank profits.

5) The G20 communique appears to have leaked out: there are the usual noises about "an open world economy based on market principles," though there is nothing about additional stimulus, other than to "call on the IMF to assess regularly the action taken and the actions required."

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