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GM Recalls an Additional 7.6 Million Vehicles


Today's financial recap and tomorrow's financial outlook.

US stocks traded in a very tight range for much of the day as quarterly stock options expired on the close. The S&P 500 (INDEXSP:.INX) was pinned near 1962 for much of the day and its ETF (NYSEARCA:SPY) at 196. The utilities sector was the strongest today thanks to strength in US Treasuries. Goldman Sachs (NYSE:GS) and Oracle (NYSE:ORCL) announced bond sales totaling $14 billion today, partially to be used to fund stock buybacks and dividends.

Overnight, China announced an effective loan-to-deposit ratio of 75%, which is a roughly 5% higher ratio of deposits than banks currently hold. In addition, banks will be able to exclude loans to rural borrowers from this ratio. These are both very positive steps for China and its financial system as the government attempts to help offset a major drop in credit growth in the first quarter.

The Chicago regional manufacturing survey edged down from its May reading of 65.0 to 62.6 this month. The expectation was for 63.0. Pending home sales had the biggest surprise, rising 6.1% in May from the month prior, down 6.9% from a year ago. Both were better than economist estimates of 1.5% and -9.0% respectively. The single-month gain is largely due to very strong new home sales contracts for the same month, which were reported last week. The household durables sector was up 0.73% today, led by homebuilder stocks (+1.37%).

General Motors (NYSE:GM) announced in a press release later in the day that it would recall an additional 7.6 million vehicles for safety reasons. This brings the total to 8.45 million for the year; the company will now record a $1.9 billion charge (versus $700 million previously disclosed) due to the recalls. Earlier, Ken Feinberg, whom GM has hired to consult on the vast number of claims filed against it, said in a press conference that the company will compensate each victim fully over the next two years. By the end of the session, GM stock had lost 1%. 

Tomorrow's Financial Outlook

The national ISM manufacturing index will be released tomorrow morning for June. The index is expected to show a marginal rise to 55.8 from 55.4 in the month prior. Regional surveys for the month have thus far been strong, but are showing a slightly lower level of expansion than the month prior. Auto sales for June are due out in the afternoon.

Overnight, the official Chinese manufacturing PMI is scheduled to be reported. Earlier in the month the private survey from HSBC showed its first month of expansion in activity this year. The official gauge should show a similar jump in activity. The Reserve Bank of Australia (RBA) will make its monthly rate decision overnight. It has the unenviable task of trying to convince the market that bank policy must be less dovish (due to recent economic strength), while the value of the Aussie dollar must fall. The implications of the its rate decision will reverberate throughout Asian foreign exchange markets. Lastly, manufacturing PMIs from Europe and the UK will be released.

There are no major earnings reports scheduled for tomorrow in the US.

Twitter: @Minyanville

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