Tuesday’s Market Recap: Banks Raising Capital To Repay TARP Money

The markets were able to hold onto gains during a turbulent day, as the Dow (^DJI: 8740.87 +19.43 +0.22%) closed at 8740.87. The NASDAQ (^IXIC: 1836.80 +8.12 +0.44%) was up 0.44% closing at 1836.80, with the S&P 500 (^GSPC: 944.74 +1.87 +0.20%) up 0.20% closing at 944.74. The 10-year saw prices fall once again, closing with a yield of 3.609%. Crude was down settling at $68.55, while August gold headed in the opposite direction settling at $984.40 as the dollar continues to fall.

Ford (F: 6.41 +0.28 +4.57%) reported that sales fell 24% during May while GM (GM), Toyota (TM: 80.99 -0.73 -0.89%), and Chrysler reported that sales fell 29%, 41%, and 47% decline respectively. Ford, which is the only major US car company not in bankruptcy, reported that it’s Ford, Lincoln, and Mercury brands captured the most market share since 2006. Ford has been able to take advantage of its competitor’s recent troubles with its balance sheet, attracting customers who wanted to buy an American car but were skeptical of the other domestic car companies’ abilities to guarantee warranty and other services. Ford also announced today that it will increase production by 10,000 vehicles this quarter and increase output 10% in the third quarter. Many experts agree that these numbers for Ford may be signaling a bottoming in the car industry, boding well for Ford as its two main competitors are in the midst of court procedures.

Barclays (BCS: 18.31 -2.19 -10.68%) was down over 10% today on news that the Abu Dhabi government controlled International Petroleum Investment Company (IPIC) sold 1.3 billion shares of the company. IPIC bought mandatory convertible notes last year when Barclays decided to raise money privately then going to the British government. Barclays is below half of its worth before the crisis, but has recently rallied since announcing plans to raise capital in October. IPIC still holds 1.25 billion pounds of reserve capital and warrants that are exercisable to 758 million shares. Khadem Al Qubaisi, the managing director of the IPIC, says that they currently maintain a good relationship with Barclays and that the reason for leaving the company is that its investment strategy has changed.

In other financial news, banks began to raise capital in efforts to repay TARP money. JP Morgan (JPM: 34.50 -1.61 -4.46%) and Morgan Stanley (MS: 30.09 +0.20 +0.67%) plan on selling $5 billion and $2.2 billion of stock respectively, while Goldman Sachs (GS: 143.13 -1.20 -0.83%) sold its $1.9 billion stake in the Industrial and Commercial Bank of China, all in efforts to repay TARP money. The banks are raising capital because the government says that these banks must prove that they can raise capital in order to exit the bailout program. Bank of America (BAC: 11.41 +0.20 +1.78%) also raised $7 billion over the past few days bringing its total to $33 billion as it approaches the $33.9 billion it needs because of the government stress test.

In tech news, Acer announced that it will be releasing a laptop running on Google’s (GOOG: 428.40 +1.84 +0.43%) Android operating system. This is a major breakthrough for Google in its stride to compete with Microsoft’s (MSFT: 21.40 0.00 0.00%) Windows operating system. Acer plans on starting to ship these laptops in the third quarter. In addition to Acer, Hewlett-Packard (HPQ: 35.84 -0.16 -0.44%) and Dell (DELL: 11.94 -0.24 -1.97%) are also looking into having their netbooks run on Google’s Android. The Google-Microsoft rivalry seems to be picking up, with Google trying to enter Microsoft’s primary market of operating systems, and Microsoft persistently trying to take market share away from Google in search, just launching Bing. The head to head battle between these two tech giants will certainly be interesting to watch going into the future.