Surging Pending Home Sales Revive Hope for the Bottom
GM and Financial Institutions Grab the U.S Attention While Surging Pending Home Sales Revive Hope for the Bottom
A day that started as quiet and rather calm has tasted the sweet and sour twist of the ongoing volatility in markets. The U.S markets today were waiting for pending sales of existing homes which did indeed enter with a big bang surpassing all expectations, while the rest of the attention was devoted to GM that is still grabbing the headlines and the financial sector which is also taking the lead especially after Citigroup was dropped from the Dow Jones Industrial Average.
For a quiet day, we can surely say that it was not that quiet. New revelations have emerged which are supporting investors’ evaluation for the outlook of the U.S economy whether this bottom is solid to support this early recovery or are we again in a formulating bubble, especially as equities count their gains much ahead of a solid economic recovery as in the early session today the DJIA is on the tips of turning green for the year!
The worst financial crisis since the Great Depression has forced the biggest names to fall and other to run to the safety of the government, where as we have seen the latest episode of this crisis was the auto giant GM. General Motors are hoping for a swift transition into their new restructured company after appealing for bankruptcy court protections.
In the first Chapter 11 hearing for GM yesterday Judge Robert Gerber set their sale hearing for June 30, while objections are set on June 19, and bids are required for submission by June 22. The judge also provided GM with direct access to $15 billion of the government’s finances for them to be able to stay afloat for the coming weeks while providing temporary approval for using the total $33.3 billion in financing.
GM says that it already has 16 interested buyers for their Saturn brand and three interested in Saab Brand. They also said that there deal to sell their Hummer Brand is still pending as no information was disclosed about the interested party and the only details provided where that GM will continue to manufacture Hummers for a transitional period and that the deal will be finalized by the end of the third quarter.
GM is just another name added to the horrific magnitude of this crisis, where still though we seen the worst pass for the financial tycoon yet they still continue to grab the headlines, especially after the Feds Stress Test and the attempts of firms to repay their TARP funds as they are aiming to restore their positioning and get rid of the excessive tight rules the treasury has tied them to under their TARP Funds.
Staring off with Morgan Staley, they are planning on raising $2.2 billion in common shares to help repay its $10 billion TARP loan. Morgan Stanly said that though their approval to repay the TARP Funds was not provided yet they are hoping to be able to make the payment prior the end of June. Meanwhile, JPMorgan and American Express announced common stocks offering to raise capital to start repaying some of their funds to assure their viability.
As for Citigroup, they were actually dropped from the DJIA after the U.S government became the biggest share holder in the bank following the funds they acquired and the preferred shares the Treasury holds, as unlike their rivals that are working towards repaying their TARP funds, Citi plans on converting nearly half the treasury’s preferred shares into 34% voting stake. Their situation is unlike their former mentioned rivals as they plan to repay the treasury to assure that their positioning in the market continues at its solid grounds!
We have come along way indeed from where we were last September, we are seeing the signs of the bottom yet not the sings of the reversal and that is what cynics fear for now as the economic signals are not stable and markets are exuberant beyond reality!
The data reported today from the National Association of Realtors showed more signs of bottoming out in the ailing housing sector. Pending Sales of previously owned homes in April surged 6.7% exceeding well median estimates for a slim gain of 0.5 percent and the previously reported 3.2% rise. Sales have increased the most in the Northeast, as they surged by 32.6% following 5.7% slump the previous month. On the year pending home sales are now higher by 3.3 percent and as we enter the fourth quarter investors have absorbed the boost of sentiment as over the coming two months many of those sales are to be translated into existing home sales.
Low prices are helping lure buyers into the market which is seemingly starting to bottom out after the severe hit it suffered. With the tax incentives provided and the support given to the market many can start to afford to buy houses now which is to help the sector start rising off its knees. Nevertheless, it’s too early to base our assumption on a full scale recovery though this sector has been the source of all the agony and its bottoming is vital for economic recovery and for the sentiment among Americans and investors.
The day was just another conjunction ahead of the heavy load fundamentals that are still to be released this week. As tomorrow we have a busy day ahead of us, where Federal Reserve Chairman, Ben Bernanke is to testify before the House Budget Committee, while as week we are waiting for the ADP Employment Change and the Services ISM for more clues regarding the state of the economy and hints for Friday’s Jobs Jamboree!
The week is still young yet so far it is looking well. In early hours of trading today indices were trading with slight gains, where as of 11:46 EST the DJIA was trading higher by 6.03 points or 0.07% at 8727.55, the S&P 500 was lower by 0.45 points or 0.5% at 942.42 and the NASDAQ Composite Index was trading at 1831.82 also higher by 3.38 points or 0.19%.
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