Why is the stock market up 200 points today;lp (so far)???

[skooooo]

I thought with GM going bankrupt, the stock market would be down! Any ideas??

[Fresh_Start]

1. because things are going to hell in handbasket

a little slower

[skooooo]

5. I keep hoping you doomsayers are wrong....

Still hoping.

[Fresh_Start]

9. manufacturing sector shows contraction slowed

"A trade group's report on the manufacturing sector shows contraction slowed in the U.S. in May and is performing better than analysts had expected alongside similar reports from Asia and Europe."


Not that expansion has occurred, merely that contraction had slowed. I'm just reading the stories.....

[skooooo]

12. thanks...

Hard to keep up with the news sometimes.

[Fresh_Start]

15. staples had higher than expected earning

due to cost cutting (layoffs, etc) not due to increased sales.....

construction spending higher than forecast but still down over 35% from prior year.....

[Statistical]

33. CISCO moving to the DOW will provide positive pressure.

CISCO is a well liked stock already and it moving to the DOW means funds that track the DOW need to buy CISCO which raises CISCO price and the Dow as well.

Also GM going into bankruptcy has been a cloud over the market. Lots of times the market just wants something done so they can look forward.

I believe GM will emerge stronger after BK. Smaller? Yes. but Stronger.

If GM makes vehicles the consumer wants at a price they can afford then people will buy it.

[onehandle]

2. It could be that the whole thing is finally coming to a head.

It's not like the bankruptcy is a surprise.

[Stinky The Clown]

3. Voodoo

Buy some VooDooFundGlobal ..... its up like a rocket.

[nc4bo]

8. Sounds about right to me. nt

[Pirate Smile]

4. Construction #'s were up in April - a good surprise.

[onenote]

6. also personal savings and some manufacturing numbers were better than expected

and the GM bankruptcy had been accounted for in the market.

[Pirate Smile]

14. Headline: 'US Stocks Higher On Global Data Pointing To Recovery'

US Stocks Higher On Global Data Pointing To Recovery

U.S. stocks and commodities gained on Monday after data from abroad reinforced hopes for a global economic recovery despite the bankruptcy filing of General Motors.

The Dow Jones Industrial Average was higher by 120 points. The S&P 500 index rose 1.6%, powered by gains of 2% in its energy and consumer-discretionary categories, and the Nasdaq Composite Index gained 1.6%.

Oil early Monday climbed to fresh seven-month highs, pushing above $68 a barrel for the first time since November. Crude-oil futures posted their largest percentage gain since March 1999 during May, gaining nearly 30%. Prices of a range of other commodities, including copper, wheat, and lumber also jumped. The Dow Jones-UBS Commodity Index was up nearly 2%.

Encouraging manufacturing data from abroad helped drive commodities. China said industrial activity there expanded in May for the third month in a row. The report helped rally foreign stocks; Hong Kong's Hang Seng Index jumped to an eight-month high, and most European benchmarks were up by more than 1% in recent trading.

U.S. manufacturing data are due at 10 a.m. Eastern time. A separate report on Monday showed personal incomes rose 0.5% in April, while spending declined by 0.1% and the savings rate hit 5.7%, the highest since February 1995. "\

http://www.marketwatch.com/story/us-stocks-higher-on-global-data-pointing-to-recovery

The manufacturing data #'s came out better then expected too which all adds to an up day - for now.

[Dawgs]

7. It's all based on overseas markets; which always have a huge impact on the US market.

They were all way up last night.

[NeedleCast]

10. Larger than expected construction spending jump

I'll enjoy badgering my right-side friends today who keep telling me the stimulus package isn't doing anything.

Manufacturing also looking better by shrinking less this month than it did last month.

[edhopper]

11. This whole market ralley

is based on wishful thinking and ignoring the economic realities.
Case in point, last week the market went up based on "better than expected" home sales numbers. Well the better was month to month noise in April, based on revised March numbers. In fact Aprils numbers were over 30% below the previous year and prices had declined 20%.
Terrible numbers, but investors closed their eyes and bought.
Look at the P.E. ratios and it becomes clear this market is overbought. Look for a retesting of the bottom.

[skooooo]

17. Hey, you gotta start with something...

I'm hoping Obama's plan has worked.

[edhopper]

30. I think long term Obama's plans will help.

I think the market is premature, it seems to be expecting a 3rd quarter recovery, I think it won't be until 2010.

[onenote]

23. and how soon do you think this "retesting" of the bottom will occur?

I'll refer you to another thread from mid-March in which a DUer predicted that the upswing that started after the Dow Jones bottomed out at 6547 on March 9 was a "sucker's rally" and that new lows would be head in a "couple of months". Well, its been a couple of months...

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=5314265

[edhopper]

31. The economics pointed to that

this is why this rally is illogical and not based on sound financial ground.
Paul Lim had a good piece on this in the Times yesterday;
http://www.nytimes.com/2009/05/31/your-money/stocks-and-bonds/31fund.html

It reminds me a lot of last year when the market did not react to all the bad news, including the Lehman collapse, until it all hit the fan.

[KharmaTrain]

13. Dead Cat Bouncing...

The stimulus and bail out have stabilized the market, but there's little to return it to the numbers it once had. Instead we're back to the build up/profit taking of the past...the market gets some good news that lifts it 100 or 200 points one day and the profit takes come in the next...a zero sum game, but it's rebuilding portfolios.

The GM News is good for other auto companies and their multinational subsidiaries...many that are traded on the NYSE. GM going down or downsizing means a bigger market share for Nissan, Toyota, VW and the companies that are invested with them. Remember, the global economy has no financial boundries.

[HamdenRice]

16. I hate to disappoint the doomers, but many economists are saying we doged a bullet

The stock market does not tell us about current conditions. It is a prediction of future profits. You may come across this phrase often: the market has already discounted the current bad news.

That means, the market already went down in anticipation of whatever the bad news of the day is. GM's stock price has already reflected the certainty of bankruptcy for several weeks. So there is no reason for it to go down further today. In fact, the kind of pre-packaged bankruptcy, that saves many union jobs and supply contracts is actually good news for the financial markets. It means that the auto industry has touched bottom, and assuming the rest of the economy stabilizes, there is no where for the auto industry to go at this point, but up. The same logic holds for other industries.

The Stimulus Bill is working. The biggest New Deal type legislation since the 30s has, basically, prevented a certain amount of job losses, especially in the public sector. The Stimulus Bill, in other words has at least begun to break the vicious cycle of job losses, lower tax revenue, strained state and municipal budgets, leading to more public sector job losses. Even more important than the actual financial effect of the Stimulus Bill is the signal it sent, which is, that the federal government will do whatever it takes to stabilize the economy. That means that more people in business are willing to bet that the catastrophe that almost happened isn't going to happen. It's going to be bad, but it's not going to be the end of the world. Since the markets were predicting the end of the world, they have to go up to reflect just a very nasty recession.

Similarly, the TARP 1 bailout basically worked. The big banks are not going to fold, and are becoming profitable. The Treasury gambled $350 billion and so far has won the bet. The banks are making timely payments of $17 billion in annualized dividend income to the US Treasury, and some are stable enough to want to begin paying back the $350 billion principal. It looks like a near certainty that the entire $350 billion is going to get paid back with interest (actually preferred stock dividends), and therefore the threat the bailout posed to our long term federal debt and to the dollar has gone away.

Job losses will continue, but job losses are a lagging indicator. In other words, job gains only begin after the companies are certain that we've touched bottom and turned the corner.

[Uzybone]

19. nicely said

[Pirate Smile]

20. There is a group that seems to want bad news and gets pissy about good news. It is bizarre.

[HamdenRice]

21. Remember September? They were saying, "let it fail!" They wanted Great Depression 2. Go figure nt

[rockymountaindem]

34. Oh yeah

I remember that well. Apparently they think that if the economy goes off the rails, only the "captains of industry" are going to get run over. Either that or it's typical Ralph Nader "things have got to get worse before they get better" thinking.

[skooooo]

22. No kidding!

Hopefully we've seen the worst. Some doomsayers like the attention they garner from their horrific predictions. I appreciate honest people who have reasons for what they think, but I don't know why some have to jump to superlatives.

Now if we can start doing something to help the environment....

[janx]

27. I've noticed that.

Why? :shrug:

[MercutioATC]

29. Would those be the same economists who didn't see the crash coming?

I'll look at the fundamentals and judge for myself, thank you.

...and the fundamentals are scary bad.

[HopeHoops]

18. Simple - bankrupt companies usually have layoffs. Wall St. loves unemployment.

That's not a joke. Whenever a company announces it is cutting jobs, the stock goes up. WTF is WRONG with people?

[W_HAMILTON]

24. Up is down.

Left is right.

The "market" seems to like anything that results in people getting laid off, companies cutting costs by cutting corners, etc.

[janx]

25. kickeroo

:kick:

[librechik]

26. Big defeats for Labor always give the market a woody

a giant drain sinks all boats--

everybody's bottom line will improve

(until they realize they've killed the golden goose--they don't know how to fix that)

[Robbien]

28. That's my exact thought

A large group of workers dropping out of the living wage category makes Wall Streeters smile.

[Sal Minella]

38. No thought given to the worker taking the paycheck home & spending it.

Wall Street sees only that a paycheck not paid out is that much money saved this week -- The Big Boys can't see far enough ahead to recognize that reducing people's aggregate purchasing power bodes ill for everybody's bottom line long run.

[edhopper]

32. Another chart to show

how skewed the fundamentals are

http://www.ritholtz.com/blog/2009/06/relationship-between-the-210-spx/#comments

[TexasObserver]

35. Because the market likes certainty, and GM filing gives more certainty.

Bankruptcy allows GM strong leverage with creditors and investors. They will come out of this a tighter company with reduced obligations.

[northernlights]

36. structured bankruptcy beats the chaos

of uncertainty or liquidation.

If you look at the charts over decades, you realize the market never goes straight down to its bottom or straight up to its peak. It's more 2 steps forward, one step back, 2 steps forward, one step back, with maybe a couple plateaus in here or there. Somewhere along the way, the bottom or top is reached and then it does the same in the opposite direction.

So there is really no way to know whether this is heading up from the bottom, or heading up before dropping to a new, lower bottom. Employment and wages have sucked for a long time now. The economy was falsely stimulated with housing, and it's going to take a lot to work that out of the market. In the meantime, many, many, many unemployed people need to find a new way to earn a living. It's all well and good to say "employment is a lagging indicator" when there won't be good jobs to go back to.

Many people have lost their livelihoods, and many more people will lose their livelihoods. Not just their jobs -- their livelihoods. And be forced to find a new way to earn a decent living.

Any real recovery will depend on what the next steps are during this window. Housing is still facing significant problems, with Alt-2 loans facing major resets, and more layoffs leading to additional foreclosures. Also, only 1/3 of foreclosed homes are actually on the market. The banks are sitting on 2/3s or so of foreclosed inventory, I guess waiting for some kind of recovery before they start dumping them, or in some times they are razing them rather than finish. Of course, houses that have been sitting empty, not maintained, and vandalized will less likely be "fixer-uppers" than more tear downs. Too bad we can't easily restore the farm land that many of them were built on.

[Hannah Bell]

37. because the gm bankruptcy went through. stock prices reflect the interests of capital, not labor.

that's why they go up when unemployment goes up.