After more than two months of sustained strength in the market, it is back to being its fickle self. Over the last two weeks we have seen a decent pull-back into the 25% retracement zone, and it felt like some of the enthusiasm had leaked out of the proceedings. Ireland was showing resistance to aid and the Eurozone was once again in peril. China was making noises about raising rates further to combat inflation. Leading stocks were seeing investors pile off the bandwagon after big runs. But this morning, if you woke up and grabbed the morning paper, the undertones were considerably less ominous. So goes today’s stock market.
The futures are currently set to gap up more than 13 handles after yesterday’s muted action. The big headline is the General Motors Co. (NYSE:GM) IPO, which is set to open higher than initial expectations at $33/share. The company is on track to raise more then $20 billion dollars, and the sale will reduce the US government’s stake from 61% to 37% in the once bankrupt company. While some expect GM to get the customary IPO boost 10-20% today, some are not so excited about the prospect of sinking money into GM. From the WSJ:
James Early, a senior analyst at the Motley Fool, says GM won’t fool him twice. “The only way I’d touch GM is with a cold, dead hand severed from my lifeless body,” he says. “GM has lost more money than it’s made for shareholders over its life. If it’s proven one thing, it’s that it can destroy shareholder value.”
We are back in headline mode after a strong run in the markets, with overnight developments making it hard to get a hold on the action. Investors are showing more of an appetite for risk as today’s headlines sound much less grim. Ireland is beginning to sound more receptive to an aid package, although it could still turn around and reject the strict terms from the EU, ECB and IMF. Initial jobless claims came in at 439,000, and this is the week that will factor into the November employment report. It is still an elevated level but if the number can hold below the 450,000 level it is a sign that pressures in the labor market are abating. In the week factoring into the October employment report, jobless claims were 455,000 and the increase in non-farm payrolls came in at 159,000. Presumably, we can expect a sharper gain.
There are some pockets of news yesterday too that generally resolved themselves positively. Dendreon Corporation (Nasdaq:DNDN) got a boost after a Medicare advisory panel approved their Provenge prostate cancer drug for coverage under the program, and the stock is trading up around 8% this morning. After being halted following an early release earnings beat yesterday and reopening after hours yesterday, NetApp Inc. (Nasdaq:NTAP) is up more than 4% this morning. The debby-downer is RINO International Corporation (Nasdaq:RINO). The stock once found itself at the top of the IBD 100 list, but a recent Muddy Waters research report brought into question the legitimacy of the company’s business operations and accounting practices. The stock has dropped nearly 70% in the last 15 trading days, and was halted yesterday pending further investigation. A stock to watch this morning is Riverbed Technology, Inc. (Nasdaq:RVBD) which has shown relative strength of late and looks set to test the top end of its recent range above $30.
*Disclosure: Long RVBD
