Morning Market Recap: Stocks Fall Ahead of Earnings and GM Bankruptcy Worries

(CEP News) - Stocks are sliding on Monday ahead of several key earnings reports and speculation that General Motors may soon declare bankruptcy. Oil is down more than $3 after a bearish demand forecast and Treasuries are rallying.

The Dow Jones industrial average was most recently down 107 points to 7977, the S&P 500 down 10 points to 846 and the Nasdaq down 16 points to 1637. In Canada, the S&P/TSX composite index is down 51 points to 9136.

"Share prices were strong last week and they are opening weaker this morning and are likely to trade lower through most of the session today, given that the last burst of buying Thursday in New York, Toronto, London et al was from short covering before the long weekend," wrote Dennis Gartman, author of The Gartman Letter. "It will be interesting to watch and see if the market opens lower and remains lower on quiet volume today, establishing an 'inside day' on the chart. If so, then higher prices are likely."

Investors are also taking profits ahead of the first quarter earnings season that begins in earnest this week. General Electric, Citigroup, Goldman Sachs and Johnson & Johnson are among the big names reporting.

Also weight on markets are several weekend reports that the Obama Administration is preparing General Motors for a surgical bankruptcy where it will liquidate unprofitable divisions and rebuild around a smaller core.

"The mere notion that GM can and will be going bankrupt casts a spell upon the U.S. dollar," Gartman said.

The euro is up 0.0100 to 1.3288 against the U.S. dollar, up 0.0151 to 1.6318 against the Canadian dollar, up 0.0026 to 0.9010 against the pound sterling and is higher by 1.02 to 133.21 against the yen.

The pound sterling is up 0.0076 to 1.4749 against the U.S. dollar and up 0.0115 to 1.8109 against the Canadian dollar.

The Canadian dollar is down 0.0010 to 0.8145 against the U.S. dollar (1.2280 USD/CAD) and down 0.14 to 81.64 against the yen.

The U.S. dollar is up 0.01 to 100.24 against the yen and the Dollar Index is down 0.695 to 85.091.

The energy market is reeling from an International Energy Agency report suggesting the worldwide recession will push demand down by 1 million more barrels than their previous forecast.

WTI crude oil is down $2.92 to $49.32.

Gold, on the other hand, is benefiting from broad uncertainty. The front month gold contract at the Chicago Board of Trade is up $14.50 to $897.40 per ounce.

In fixed income, U.S. two-year yields are down 6.4 bps to 0.88%, with five-year yields down 7.0 bps to 1.82%, 10-year yields down 6.8 bps to 2.85% and 30-year yields down 6.4 bps to 3.69%. The Eurodollar September 09 contract is up 1.5 ticks to 98.89. The yield curve is flatter, with the 10/2-year spread down 0.3 bps to 196.99 bps.

Yields on two-year Canadian government notes are down 1.8 bps to 1.10%, with five-year yields down 1.9 bps to 1.85%, 10-year yields up 0.6 bps to 2.93% and 30-year yields down 0.7 bps to 3.64%. The September 09 BAX contract is up 2.0 ticks to 99.48.

In Germany, returns on two-year German notes are down 0.8 bps to 1.38%, with five-year yields down 0.5 bps to 2.43%, 10-year yields down 1.8 bps to 3.23% and 30-year yields flat at 4.05%.

Yields on UK two-year notes are up 1.8 bps to 1.38%, with five-year yields down 1.1 bps to 2.45%, 10-year yields flat at 3.29% and 30-year yields flat at 4.31%.

All data taken at 9:56 a.m. EDT.

By Adam Button, abutton@economicnews.ca, edited by Ernest Hoffman, ehoffman@economicnews.ca

CEP Newswires - CEP News © 2009. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.