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US Equities began the 1st week of the month on a familiar pattern, staging strong gains as the expectation of dismal government reports on employment and the sense of an overdue pullback for the recent run up in stocks took hold of the major indices today. Financials and automaker s led the markets lower as Treasury Secretary Geithner stated that a number of currently distressed financial institutions may need additional financial support, even as the TARP funds available continue to be drained down. The Secretary stated that approximately $135 billion of the $700 billion is left and the prospect of further request for funds is not out of the question.  The reemergence of concerns regarding further bailout of financial institutions hit Citigroup, Bank of America, and Wells Fargo particularly hard. All of the banks suffered double digit percentage falls today. The sector came under early pressure after European intervention to shore up domestic lenders help to rekindle fears regarding the security of global financial institutions.

 

The greatest stone around the neck of the equity markets today was the negative sentiment fueled by the rejection of the turnaround plans proposed by General Motors and Chrysler. The sector was already reeling from the uncertainty posed by the forcing out of GM CEO Rick Wagoner. A particularly strong tone taken by the US Administration proposed the notion that US automakers must not be become “wards of the state” and that if unable to formulate workable strategies and alliances, declaring bankruptcy was a viable alternative. While acting as a catalyst for the markets pullback, the notion of one or more of the 3 major US automakers declaring bankruptcy appears to have more of a tone of resignation than financial panic. Equity markets may be seeking further clarification for the rational of this stern stance. Traders should be careful for a “clarification” of this statement which could leave a wider shade of gray for the automakers to maneuver within. Industrial and energy stocks also declined as energy prices dropped over 7 % in the wake of a perceived over estimation of world demand as well as a significant rise in the value of the US dollar.

 

Technically, June Dow Futures should find its first support level at 7349, with key support remaining in place at 7260. Market should seek to fill in gap left from 7601, with movement above this level setting up for a possible rally to 7970.

 

EQUITY RANGES

OPEN

HIGH

LOW

CLOSE

CHANGE

DJM9 (JUNE DOW)

7555

7560

7382

7480

-282

SPM9 (JUNE  S&P)

794.00

794.70

775.70

784.30

-31.00

NDM9 (JUNE NASDAQ)

1231.00

1232.00

1203.00

1227.75

-33.25