Thursday Look Ahead: New GM Hits Market; Jobless Claims, Europe in Focus

A restructured General Motors rolls out its new stock at the NYSE Thursday, in another unwind of the government's bailout programs.

New York Stock Exchange (NYSE)
Oliver P. Quilla for
New York Stock Exchange (NYSE)

The new GM is raising a potential $23 billion in one of the biggest offerings ever. Traders expect the stock to bounce above the $33 per share offer price, at least initially. The government stake in the company should drop from 60 percent to between 33 and 37 percent, and Treasury has said it will not divest any more stock for six months.

As GM starts trading with much fanfare, investors will also be keeping an eye on Europe and several important U.S. economic data points Thursday. Weekly jobless claims are released at 8:30 a.m., and the Philadelphia Fed survey and leading indicators are released at 10 a.m.

"We need to see below 450,000 claims. If there's disappointing data two days in a row, it will really hurt the dollar. The other number that is important is the Philly Fed," said Boris Schlossberg of GFT Forex. He said the dollar weakened on an unexpected 12 percent drop in housing starts Wednesday. Earlier in the week, the Empire state manufacturing survey showed a surprise decline.

"If Philly is weak, that really kills the 'U.S. picks up growth in the fourth quarter theme' that's helping the dollar a lot," he said.

Stocks drifted Wednesdayafter Tuesday's steep sell off. The Dow was down 14 points to 11,007 and the S&P 500 rose less than a point to 1178. The Nasdaq was up 5 at 2476. Stocks held steady as fear of sovereign risk in Europe waned. The dollar lost 0.2 percent against the euro and was barely changed against the yen.

Ireland, the source of recent worry, has agreed to allow the IMF and European Central Bank to conduct an examination of its banking sector. The team arrives in Dublin Thursday, and its findings are expected to lead to a bailout. "Everybody's going to look for the Irish budget, which will come out a week from Friday. Bottom line, they continuously made the point they are well funded through 2011. That's true, but they still face rollover risk when mid-year comes. The market at this point is not going to back off the high yields," said Schlossberg.

Traders are watching to see how a 4 billion euro Spanish bond offering fares early Thursday. Spain, with more debt than Greece and Ireland together, has also seen spreads widen in the latest round of sovereign debt concerns. Greece also unveils the final draft of its 2011 budget Thursday.

There are also a number of earnings releases Thursday morning, including Sears, GameStop, Staples, Dollar Tree, American Eagle, Williams-Sonoma and J.M Smuckers. Dell, Intuit and Gap report after the bell.

In addition to GM, there's another IPO worth watching. LPL Investment Wednesday priced 15.7 million shares at $30, the top of its range and it starts trading on Nasdaq Thursday. Harrah's, renamed Caesars, is also returning to the stock market. Its 31 million share offering will price after the bell Thursday.

Whither Markets

Wednesday was a much calmer day in the bond market, after several days of heightened volatility in Treasurys. The 10-year declined slightly, and its yield rose to 2.864 percent.

"I don't think volatility is going to subside. I think volatility will be with us until the market comes to a pretty clear cut consensus on QE," the Fed's quantitative easing program, said Jefferies Treasury strategist John Spinello.

"What I do think is more important is what comes out of Congress between now and December" on taxes, he said.

The Fed's quantitative easing drew fire from Congressional Republicans Thursday. In a letter to the Fed chairman, they pointed to the international criticism of the program and said the Fed should curtail it because it is hurting trade and the dollar.

Fed chairman Ben Bernanke held a private meeting at the Senate Banking Committee earlier in the day, and Sen. Richard Shelby (R-Ala.) said the Fed chairman told the committee the easing program could result in the creation of 700,000 jobs within two years.

The Fed also issued guidance for banks Wednesday, as a precursor to the sector reinstating dividends. It said it plans to apply stress test measures to the 19 largest banks, the original participants in the stress test.

The bond market is also watching California's issue of $10 billion in short-term bills Thursday, and $2 billion in bonds.

Oil Gets Drilled

Oil continued its rapid decline Wednesday, falling another 2.3 percent to $80.44 per barrel, its lowest level since Oct. 19.

Worries that China is tightening in the face of rising inflation has hurt commodities and risk assets in the past week.

"It's really predominantly China, and it's clearly evident. The dollar was relatively flat and oil was still down," said John Kilduff of Again Capital.

"$80 is the level to watch. If we break 80, we could go to the mid to low 70s," he said.

What Else to Watch

Several Fed speakers are out speaking Thursday, including Fed Gov. Kevin Warsh who discusses the future of financial markets at 1 p.m. Fed Gov. Elizabeth Duke appears before the House Financial Services Committee at 10 a.m. on foreclosure documentation issues.

Minneapolis Fed President Narayana Kocherlakota speaks in Chicago at 1:30 p.m. on monetary policy actions, and Philadelphia Fed President Charles Plosser speaks at 4:30 p.m. at Cato in Washington on asset bubbles and monetary policy.

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