Thursday’s Market Recap: Stocks, Crude Oil And Gold Are Up

The markets had a good day, with the NASDAQ (^IXIC: 1751.79 0.00 0.00%) up 1.20%.  The S&P (^GSPC: 906.83 0.00 0.00%) was up 1.54% closing at 906.83, while the Dow Jones Industrial Average (^DJI: 8403.80 +103.78 +1.25%) was up 1.25% finishing at 8403.80.  The 10-year saw prices rise over a dollar, as the yield fell to 3.620% on successful 6-month T-bill announcements and closings of attractive bid to cover ratios from the previous week.  Crude oil and August gold were both up, settling at $65.08 and $963.20 respectively.  Crude oil advanced on an inventory drawdown that was almost five times what was expected by analysts.

General Motors (GM: 1.12 0.00 0.00%) announced that they have reached a new debt-for-equity agreement with bondholders today that would give the debt holders 10% in equity of the new GM company and the ability to buy 15% more of the company’s equity.  It has been reported that a group representing 20% of the debt holders has accepted the agreement, with the remaining debt holders needing to accept the offer by the 5 P.M. deadline this Saturday.  The GM bondholders like this deal better than the previous deal, 225 share of common stock for every $1,000 in debt because the first deal was an attempt to avoid bankruptcy, while this deal is a prepackaged bankruptcy.  The US Government will receive 72.5% of the company and lend General Motors an additional $50 billion dollars. The United Auto Workers Union will receive a 17.5% in the company with an option to buy 2.5% more.  Bankruptcy proceedings for GM could start as early as this coming Monday, with GM not being a publicly traded company for the time period starting this weekend up to following 18 months.

Time Warner (TWX: 23.55 0.00 0.00%) started moving forward with its announcement that it would spin off its AOL unit into a separate publicly traded company.  Time Warner acquired AOL eight years ago, and shareholders have recently been calling for a spin-off of the struggling unit, as shareholders want Time Warner to focus on its content creation, film, and television businesses.  The spin-off of AOL will start after Time Warner acquires 100% control of AOL by buying back a 5% ownership that Google (GOOG: 410.40 0.00 0.00%) currently holds.  After this, Time Warner will begin to spin-off AOL in an effort to complete the process by the end of 2009.  AOL has recently transformed from a provider of dial-up internet to a web portal, which makes most of their money from advertising.  In the most recent quarter ad revenue was down 23% for AOL.  AOL is currently estimated to be worth $5.5 billion, down from the $106 billion that Time Warner paid for them in 2000 and from the estimated $20 billion they were worth in 2005, when Google bought its 5% stake.

In earnings news, Dell (DELL: 11.48 0.00 0.00%) was up over 0.5% afterhours when they announced earnings of $290 million, or $0.15 per share, down from net income of $784 million, or $0.38 per share the same period the year before.  Dell missed analysts estimates on both earnings and revenue; revenue fell 23% to $12.3 billion opposed to the estimated $12.6 billion and $0.22 per share.  Sales were down in PC’s, laptops, and servers falling 34%, 20%, and 25% respectively from the same quarter the year before.  The Texas based computer giant has been suffering significantly during the economic turmoil, down over 47% since the beginning of September.