Top 10 News Items 5/26-5/29: GM Confirms Support of UAW-Represented Employees on Amended Contract, But Bankruptcy Still Likely; Yield Curve Steepens to Record Levels; Oil, Gold Surge

May 29, 2009 4:02 PM EDT

Here is a recap of the top news items from this week on Wall Street:

1. Late Friday, General Motors (NYSE: GM) officials confirmed that its UAW-represented employees have ratified the modifications to the GM-UAW 2007 National Labor Agreement. Despite this development, market players are still expecting GM to file for bankruptcy either this weekend or by Monday. Sources have indicated that the government will hold a 72.5% stake in the "new GM".

2. The so-called yield curve rose to a record 2.75% this week, indicating investor concerns related to rising levels of U.S. debt. The yield curve, which plots yields of Treasury bills along a graph ranging from shortest duration to longest, is now sloping upward to unprecedented levels as traders are worried that debt sales will overwhelm the Fed's attempts to keep borrowing costs low.

3. Commodities outperformed the broader markets this week as traders continue to look for hiding places for their investments. With the summer driving months just around the corner, crude oil had one of its strongest month-long surges in decades, finishing May off with a 7.4%, or about $4.60, spike to over $66. Meanwhile, gold and silver also rose as the "flight-to-safety" trade is coming back into play considering a sharply upward sloping yield curve. Continued concerns related to the strength of the dollar also boosted these goods.

4. Numerous data points surrounding the housing market were released this week. April Existing-home sales which rose 2.9% to 4.68 million units gave legs to the sector, but data on home prices and inventories weighed on housing-related stocks. The national median existing-home price for all housing types was $170,200 in April, marking a 15.4% drop from the same period last year. Also, inventories for the month rose 8.8% to 3.97 million existing homes available sale, meaning the market has a 10.2-month supply at current price levels.

5. Auto parts maker Visteon (OTC: VSTN) filed for bankruptcy on Thursday of this week, marking the end of yet another auto-related company. Visteon said it expects to fund its operations with its U.S. cash balance, cash flows from operations and a debtor-in-possession facility. Ford Motor Company has executed a commitment letter to support debtor-in-possession financing for Visteon' restructuring efforts and to ensure long-term continuity of supply. The company said other global customers have also expressed their support.

6. The FDIC released data on Wednesday of this week showing that profits at institutions it insures fell 60.8% during Q1. The agency indicated that this sharp drop was the result of higher loan-loss provisions, increased goodwill write-downs, and reduced income from securitization activities. The FDIC also said the number of banks on its "Problem List" rose from 252 to 305 during the quarter, boosting the total assets of problem banks from $159 billion to $220 billion.

7. Following months of letters back and forth between Target (NYSE: TGT) and Bill Ackman's Pershing Square, the retailer finally announced that its shareholders have turned down Ackman's slate of Directors, re-electing all of the company's nominees. According to one point of Ackman's case, Target, having large exposure to both real estate and credit cards, does not have experts on either of these areas on its Board. Shares of Target finished this week about 4.3% lower.

8. Bank of America (NYSE: BAC) execs continued to work toward meeting their capital buffer requirement this week, most recently announcing that it has raised almost $26 billion in capital. The bank also announced this week that a new offer to exchange up to 200million shares of common stock for outstanding depositary shares of certain series of preferred stock will happen.

9. Following news last week that S&P moved the U.K.'s credit watch to Negative, the credit-rating agency was out this week assuring investors that the U.S.'s credit outlook is stable "for now". Moody's cited the diverse and resilient U.S. economy, strong government institutions, high per capita income, and a central position in the global economy. Further, the agency pointed out that the U.S.'s balance sheet still remains flexible.

10. Late Wednesday, traders were once again surprised with closing of yet another massive hedge fund. Art Samberg's Pequot Capital will be closing and liquidating the main funds due to a federal insider-trading investigation that has "cast a cloud over the firm." Pequot's funds peaked at approximately $15 billion in 2001, prior to Samberg splitting with Daniel Benton, with each managing about half the firm's capital for their own firms. Since then, Pequot's assets have drifted lower, and it was now managing approximately $3 billion.

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