Morning Update

GMAC Assistance Lends Helping Hand

An expansion in the auto bailout plan to include GMAC is providing some support for shares in early action, but like yesterday, volume is expected to be light and any trends that may develop could be exaggerated by the lack of liquidity in the market in this holiday-shortened week. Equity news is sparse to start the session but traders will get a look at the latest in home prices, while consumer confidence data will be out shortly after the opening bell. Meanwhile, Dow Chemical is reportedly looking at a bridge loan to complete its proposed acquisition of Rohm & Haas, while Treasuries are lower and global markets are rising.

As of 8:34 a.m. ET, the March S&P 500 Index Globex futures is 11 points above fair value, the Nasdaq 100 Index is 10 points above fair value, and the DJIA is 88 points above fair value. Crude oil is down $0.43 to $39.59 per barrel, and gold is down $6.40 at $868.90. The overnight LIBOR rate was unchanged at 0.14%, and the three-month LIBOR rate dropped 2 bp at 1.44%.

The federal government announced it will provide $6 billion in funds to GMAC, the minority-owned financing arm of General Motors (GM $4). The Treasury said it has purchased $5 billion in senior preferred stock and has offered a $1 billion loan to GM, which is in addition to the $17.4 billion in emergency funds provided to the Big Three automakers earlier in the month. The $1 billion loan will enable GM to purchase new common equity in GMAC.

Dow Chemical (DOW $15 ¹) is reportedly looking to use a $13 billion bridge loan to complete its planned purchase of Rohm & Haas(ROH $53), according to the Financial Times. The deal was thrown into doubt yesterday after the Kuwaiti government backed out of a joint venture that deprived Dow Chemical of the funds it had planned to use to finance the takeover. People familiar with the matter also said Dow may try to renegotiate its $78 per share price with Rohm & Haas given the decline in the company's valuation. None of the parties involved commented.

Housing prices and confidence come into focus

Before the market opens, October's S&P/CaseShiller Home Price Index of 20 cities will be released and a 17.9% decline versus a year ago is expected, according to Bloomberg. The decline would be the worst on record and is worrisome as foreclosures rise and potential buyers remain at bay.

At 10 a.m. ET, the Consumer Confidence Index is expected to rise from 44.9 in November to 45.5 in December. Job losses are soaring and early data suggests that the 2008 holiday shopping season was one of the worst in memory, but gasoline prices have tumbled, which has helped to stabilize consumer sentiment.

Europe rises

European stocks are pushing ahead, cheering the US government's decision to pump new funds into GMAC. The advance was not limited to automakers as techs, steel, and telecom equipment makers pushed ahead. However, shares of HBOS (HBOOY $1) and Lloyds (LYG $1) are down after the Financial Times reported that the trustees of the HBOS pension plan are considering asking the courts to stop the bank's proposed acquisition of Lloyds. Neither firm commented.

Asia pushing ahead as year nears end

Stocks in Japan climbed out of an early hole and finished a half-day session on a positive note, bringing to an end its worst year on record. The Nikkei 225 Index finished up 1.3% to close at a six-week high; however, the recession that is enveloping economies around the globe and the soaring yen worked to lop 42% off the benchmark index in 2008. Elsewhere around Asia, shares posted gains, with Taiwan jumping nearly 4% after the government said it plans to put together a rescue plan for the island's struggling chipmakers. The makers of DRAM chips used in PCs have reported large losses amid falling demand, falling prices, and an oversupply of chips.

South Korea was limited to a 0.6% advance after industrial production tumbled 10.7% in November and fell 14.1% year-over-year, the worst decline since records began in 1976. The latest reading may prompt further rate cuts but South Korea's economy is heavily dependent on global sales and they remain dependent on the global economic situation.