The three major indexes were all down, with the NASDAQ down 2.44%. The S&P 500 was down 1.32% closing at 907.39, while the Dow Jones fell 1.20% to close at 8409.85. The 10-year treasury closed with a yield of 3.330% as prices fell. Prices on June future contracts of gold were up, settling at $915.50, while crude oil prices were unchanged, settling at $56.71.
General Motors (GM) reported a loss of $6 billion, or $9.78 per share, widening the loss from the quarter the year prior of $3.3 billion, or $5.80 per share. The loss would have been $9.66 per share, but GM’s exclusion of gains from restructuring charges and getting rid of debt from the balance sheet accounted for the higher loss. Revenue fell from $42.4 billion to $22.4 billion as demand for cars and trucks fell in the down economy. GM was hurt substantially worse than their competitors as many consumers are worried if warranties would be honored if the company goes bankrupt. GM is still trying to make a deal with the autoworkers union and their creditors in order to avoid bankruptcy; the company has been given a deadline of June 1, by the government. GM has not made any headwind with its creditors in a potential debt-for-equity swap, as GM creditors would have to take a financial hit for the car company not to end up in court. GM moving forward wishes to operate only the brands of Cadillac, Chevrolet, GMC, and Buick while selling Hummer, Saab, and Saturn, and phasing out Pontiac. GM’s fate remains unclear currently, but it will be resolved in less than a month.
After hours yesterday, News Corp. (NWS) reported earnings of $2.72 billion, or $1.04 per share, beating earnings from the first quarter a year ago, when they reported earnings of $0.91 per share. The media giant reported revenue of $7.4 billion, failing to meet the street’s estimate of $7.71 billion. Chairman Rupert Murdoch, during Wednesday’s conference call, said that he believes the worst is over and he sees revenues looking healthier and advertisers are beginning to return to the marketplace. The slip in revenue and sales of print media and the transition into internet news is evident, and Murdoch believes that within twelve months internet newspapers will be charging for content. Murdoch believes that charging for content can be successful and points to the Wall Street Journal online as a prime example.
Wal-Mart (WMT) announced that sales were up 5.9% in April, beating the estimated 2.9% increase. Demand increased as a later Easter, warmer weather, and acceleration in traffic bettered sales last month. Wal-Mart has been a winner in the down economy as consumers have been trading down to purchase everyday items at value-prices. Despite strong growth numbers, it is not a definite that the American consumer is back with the same tenacity that it had before, with many warning that despite a pickup in consumer spending, consumer discretionary spending has not seen a clear turnaround. With the bottom possibly being reached, investors have to be aware that the recovery might not be a fast recovery, but a slow one, and they need to base their investment decisions with this in mind.
Check back tomorrow, to Bullish Bankers for another market recap.
- Matt Shannon
Disclosure: The Fund the author is associated with is long WMT.
