The markets were down today, with the NASDAQ down 1.89%.  The S&P closed at 888.33 while the Dow Jones Industrial Average finished at 8292.13, down 1.68% and 1.54% respectively.  The 10-year saw yields rise to 3.368% as the price on the treasury fell.  Oil prices declined to settle at $61.05, while gold headed the other way, settling at $951.20. 

In earnings news, GameStop [GME: 22.38, -4.09 (-15.45%)] announced earnings of $70.4 million, or $0.42 per share, beating the average estimate of $0.41 per share while also bettering the same period the year prior, when they released earnings of $62.1 million, or $0.37 per share.  Sales rose 9% this quarter as GameStop’s main business, used game sales, rose from 23% in the year ago period to 28% this period, making up 48% of gross profit in the first quarter.  GameStop’s stock price was down over 15% today despite beating earnings, as it updated its forecast for the current quarter to between $0.28 and $0.33 per share, far below the street’s estimate of $0.40 per share.  GameStop’s reasoning behind the predicted poor performance is that there are no big name games currently in the marketplace that consumers will buy despite a rough economy, especially compared to games that were available in the period the year prior.  GameStop also is worried about the effect that a more then 40% decline in sales of video game consoles will have on their business in addition to a predicted same store sales decline between 8% and 11%.  GameStop moving forward has to not only be worried about the economy, but also Amazon’s [AMZN: 75.96, -2.01 (-2.58%)] and Wal-Mart’s [WMT: 49.11, +0.17 (+0.35%)] entry into the used video game market.

General Motors [GM: 1.92, +0.47 (+32.41%)] was up over 32% today on news that the United Auto Workers had reached a tentative deal with GM and the Treasury Department, which is key in GM’s plans not to file for bankruptcy.  Details of the plan have not been released, but many speculate that it is similar to the deal that Chrysler reached with the UAW, which lowered labor costs and obligation to fund the retirees’ healthcare program.  This will not be enough for GM not to be forced into Chapter 11 by the Obama administration.  The key behind GM avoiding bankruptcy is their debt holders, if they accept the debt-for-equity swap of $27 billion in debt.  So far GM debt holders have not embraced the swap and more than likely are not going to in the future.  The current deal for the debt-for-equity swap will remain on the table until May 26, when GM will have to decide to up the offer or to accept a almost certain bankruptcy.  The long saga surrounding GM is coming towards an end, and until June 1 we can only speculate about the outcome.

The Labor Department reported that initial jobless claims, for the week ending May 16, fell 12,000 to a seasonally adjusted 631,000, which was more than the estimated fall of 7,000.  The previous week’s numbers were adjusted from 637,000 to 643,000, as the high numbers reflected employees in the auto industry being severely hit.  The numbers for those receiving unemployment for more than a week ending the week of May 9, was up 75,000 to 6,662,000.  Numbers are on the rise as the economic crisis continues, making it increasingly harder to find a job with the end to rising unemployment uncertain.

Check back Friday for another market recap.

- Matt Shannon

Disclosure: The mutual fund the author is associated with is long WMT.

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